It should be noted that any agreement with the IMF will require solving the problem of relative prices, a task that will not be easy and looking at the numbers, one understands the concern of most economists and investors that is reflected in the instability of the market.
Argentina is a champion in terms of relative price volatility (that is, the magnitude by which the prices of goods and services change compared to others).
Between December 2016 and September 2021, Argentina presented the highest relative price volatility within a group of 42 countrieshighlights a study carried out by the Argentine Institute of Fiscal Analysis (IARAF). The subject acquires particularly interesting at a time when more than a few economists warn that key prices such as rates, wages and even the exchange rate are lagging.
“In countries with high inflation there is also a high volatility in relative prices”, points out the work of the consulting firm that presides over Nadin Argañaraz. This greater instability leads to think that also the largest are the distortions in the allocation of resources.
The relative price is calculated from dividing the group price by the general price level. Volatility is defined as the coefficient of variation of the relative price, multiplied by 100.
When analyzing the different components of the Consumer Price Index (CPI) of Argentina, the study indicates that the group Housing, water, electricity and other fuels was the one with the highest volatility of the analyzed period.
The volatility indicator was 11.9, clearly appreciating the incidence of the removal of energy subsidies from the previous government and the subsequent replacement of those.
The rates belong to the sets of prices that are lagging, according to the economist Adrian Yarde Buller. In this regard, he calculates that, In the last 2 years, core inflation was 106%, while water rates were frozen, gas rates rose 9% and electricity rates 11% (based on data from CABA’s CPI).
This work considers that the comparison of inflation levels between different countries of the world is common. From this perspective, the consensus estimate of economists predicted last September an inflation of 48.4% for the country, a figure that, if materialized, would place the country in fourth place in the world inflation ranking, behind Venezuela (2,700 %), Sudan (115.5%) and Suriname (48.6%) according to IMF data (see scope.com of 10/12/21).
Wages and dollar
Regarding wages, Between 2018 and 2020, the real purchasing power (after inflation) of formal workers fell by almost 17%.
In recent months, adjustments in the framework of joint ventures led to “A meager recovery, close to 1% year-on-year of purchasing power in the second semester, but which will not compensate for the accumulated deterioration in the first part of the year”, according to Ecolatina. Thus, it foresees that In 2021, the real salary of workers in white will close the year with an average fall of the order of 3%, chaining the fourth consecutive red.
Finally, the official exchange rate has been depreciating at a rate of 1% per month, that is, at approximately one third of inflation registered in recent months.
The level of the official dollar it is not as delayed as it happened in previous moments prior to a devaluation jump, consigns the consultant. With a value of 98 pesos for last September, the official exchange rate is far from the minimum values of 68 that it registered before the devaluation of 2014, 61 before the devaluation of 2016 or 69 that the dollar had in 2018 before of the trigger that characterized the last part of the management of Mauricio Macri.
The problem is that, if the delay in the update is maintained, in 2022 the minimum values indicated above will be reached, which is why, the consultant warns, it is considered “untenable” this policy.
Source From: Ambito
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