The economic crisis in Argentina is continuing to worsen, with a significant portion of the population now living below the poverty line. In response to the soaring prices that have been negatively impacting incomes and pushing people into poverty, the country’s central bank has raised the benchmark interest rate for the sixth time this year.
This latest interest rate hike brings the rate to 133% from 118%. The decision was made shortly after September’s inflation data revealed a month-on-month spike of 12.7% and an annual inflation rate of 138%, which is the highest it has been in three decades. These alarming statistics highlight the severity of the economic situation in the country.
The National Institute for Statistics and Census (INDEC) released a report last month indicating that the poverty rate in Argentina had risen to 40.1% in the first half of 2023. This means that two out of every five people in the country, totaling approximately 11.8 million individuals, are now living below the poverty line. The Center of Argentine Economic Politics (CEPA) think tank further emphasized the wage stagnation in the country, revealing that the median wage only covers 85.6% of the basic food basket as of August.
However, some experts believe that these efforts to raise interest rates may be too little, too late given the depth of the economic crisis. They argue that raising the rate at this point will not be effective in halting the flight from pesos to dollars, as expectations have already shifted. A national private banking manager, speaking anonymously to Reuters, expressed doubts about the efficacy of the interest rate hike.
Private analysts predict that inflation will reach 173.2% this year, while Moody’s rating agency projects even higher figures of 200% for this year and 350% for 2024. These forecasts paint a grim picture of the future economic outlook for Argentina.
Interestingly, this interest rate hike comes just ten days before the upcoming presidential election in Argentina, which is scheduled for October 22. Many candidates are promising to address the country’s fiscal deficit in an attempt to curb inflation. However, one outsider candidate named Javier Milei, who won the August presidential primary, has proposed a different solution. Milei is advocating for the elimination of the peso entirely and the adoption of the US dollar.
The economic crisis in Argentina has significant implications for the future of the country and its citizens. As poverty rates rise and inflation continues to surge, it is clear that a comprehensive and effective strategy is needed to stabilize the economy and improve the living conditions for millions of struggling Argentinians.
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