Number used by state agency for inflation calculations causes uproar in Argentina

A fierce debate over the number used for an index used for the analysis of economic health has erupted in crisis-hit Argentina, as a new report shows that inflation has accelerated more than expected for the fifth consecutive month in January. 

The closely watched release of a report by the country’s statistics agency with the contested figure has fueled political controversy and posed a challenge for libertarian President Javier Milei, according to an article by AP.

Consumer prices rose 2.9% in January compared with December, according to the agency known as INDEC. The increase was driven largely by higher costs for food, dining, hotels and utilities.

However, economists argue that the methodology INDEC uses to calculate inflation understates the true pace of price increases in a country grappling with the effects of Milei’s sweeping austerity program. The current index is based on consumption patterns from 2004, a framework critics say no longer reflects Argentina’s economic reality.

Facing mounting criticism, Milei’s government had announced plans to overhaul the index used in official inflation reports. But last week, officials reversed course and said INDEC would continue applying the existing formula, despite earlier expectations that the revised index would debut in this report.

“It is very likely that the regulated public service prices in Argentina will see a strong increase this year, and the new methodology for measuring inflation will give those increases a lot more weight,” said Camilo Tiscornia, director of the Buenos Aires consultancy C&T Asesores Economicos and a former central bank official. “The government is engaged in a fight against inflation, so this index doesn’t help.”

The reversal triggered fresh turbulence, which saw Argentina’s widely respected national statistics chief resign amid the controversy, and the benchmark S&P Merval stock index fell several percentage points last week.

According to the AP, the dispute has revived memories of past manipulation of official inflation data. During the presidency of Cristina Fernández de Kirchner, who succeeded her husband Néstor Kirchner in 2007, Argentina faced accusations of distorting statistics to understate inflation.

Between 2007 and 2013, the government dismissed technical staff at INDEC and replaced them with political allies as inflation surged. Fernández’s administration was also reported to have imposed fines and threatened legal action against independent economists who published alternative inflation estimates, the AP said.

By Nazrin Sadigova