High political uncertainty and lack of reserves could imply further misalignments between inflation and the official depreciation page

A sound macroeconomic stabilization plan, along with political and social support, will be essential to effectively curb inflation and address macroeconomic misalignments

Although inflation slowed in May, multinationals should expect significant price pressures in Argentina to persist due to unanchored expectations, subsidy adjustments, and severe local currency pressures. Given that low-income segments are most affected by inflation, companies should target upper-income deciles or customers with considerable US dollar-denominated wealth, as they are more likely to maintain stable discretionary spending and benefit from the depreciating exchange rate. Amid an economic recession coupled with high inflation and stronger import restrictions, implementing IT solutions for inventory management is crucial to address an inventory glut effectively. As the political landscape is fraught with significant uncertainty and Congress is expected to be incredibly fragmented, multinationals should establish proper inroads with the candidates’ economic teams and potential legislators from all parties to discuss their economic policies. 


  • In May, inflation rose by 7.8% MOM, lower than April’s 8.4% MOM figure, resulting in an annual rate of 114.2%. Despite this slight deceleration, we do not expect a clear downward trend, and monthly inflation is projected to range between 7% and 9% as we approach the October presidential election.  
  • The May variation was primarily driven by an 11.9% MOM increase in the utility category due to subsidy adjustments. Prices for food and non-alcoholic beverages experienced a significant slowdown, rising by 5.8% MOM compared to April’s 10.1% MOM, attributed to a modest increase in beef prices (1.5% MOM). The increase in medicines and prepaid medical services explains the rise in healthcare prices (9.0% MOM).
  • The official peso depreciated by an average of 7.3% in May. Unlike previous months where there was a significant gap between inflation and exchange rate fluctuations, the pace of depreciation in May was aligned with the monthly inflation rate. However, with stricter import restrictions and diminishing reserves, we expect the government to have less leeway in maintaining this balance. 
  • On June 15, following three policy rate hikes in April and May, the central bank maintained the rate at 97%. The statement noted that this decision aligns with the inflation deceleration observed in May. Nevertheless, additional rate hikes are necessary to achieve positive real interest rates, address the still-high inflation, and stimulate demand for the peso.

Our View

Recent government measures, such as policy rate hikes and tariff-free import authorization for food items, are steps in the right direction. However, the current government will likely fail to reverse the upward trajectory, and macroeconomic imbalances will persist throughout 2024. Therefore, the next administration must implement a stabilization plan that includes a significant reduction in the fiscal deficit and money printing and the clear and timely elimination of foreign currency controls. Our annual average inflation forecast is 110% for 2023, and we expect triple-digit inflation to persist in 2024 (101%). Finally, given the operational challenges, we have revised our 2023 GDP forecast downward (from -1.5% to -2.0%) due to a significant decrease in exports and lower-than-expected consumer spending and private investment.

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