Inflation falls, poverty rises in Argentina

(CLO) Last month, Argentine President Javier Milei attracted attention when he posted a photo of himself and his cabinet posing with a golden chainsaw - a symbol of the drastic spending cut campaign he pledged to implement.

With the proud caption "Best government in history", Mr. Milei somewhat asserted his determination, although the effectiveness of the policies is still a controversial topic.

Since taking office in late 2023, Milei has implemented a series of measures to adjust the country's finances. He has drastically cut public spending, abolished many government ministries, fired hundreds of officials and reduced pensions and public salaries.

These measures helped Argentina achieve a fiscal surplus in the first month of President Milei's term and maintain this performance throughout 2024, a rarity in the country's recent economic history.

A woman in Argentina is shopping at the supermarket. Photo: GI

As a result, government spending fell 30% year-on-year, and monthly inflation, which had been at 25% when Milei took office, dropped to just 2.4% in November 2024, its lowest level in over four years. Inflation, the biggest concern for voters, is gradually being brought under control, creating a positive signal in Milei's efforts to revive the economy.

In addition, tight monetary policies and tax exemption programs have attracted billions of dollars in new foreign exchange reserves to the central bank. Argentina's national risk index has fallen sharply from 2,000 to 750, its lowest level in five years. This reflects a shift in how the market views Argentina under President Milei.

However, this improvement came at a heavy social cost. The working class and the poor were the hardest hit by the austerity measures. The poverty rate rose from 40% in 2023 to 53% in the first half of 2024, before slightly decreasing to 50%. Nearly 70% of Argentinian children live in poverty, and more than a million children regularly go to bed hungry.

The removal of subsidies for energy and public transport has caused utility bills to soar, significantly reducing the purchasing power of working-class people. Although wages have risen above inflation for six consecutive months, the improvement has not been enough to offset the damage from austerity policies.

Politically , Mr. Milei has demonstrated his ability to govern in a context where his party has limited power in the National Assembly and does not control any provinces. He has successfully passed some policies thanks to compromises with other parties.

Nevertheless, the challenges remain significant. The Argentine economy is still in a fragile state. Economists warn that the peso is overvalued, putting pressure on exports and making it difficult for the central bank to accumulate sufficient USD reserves. A peso devaluation is possible, but this would come with the risk of renewed inflation, threatening Milei's main achievement.

The Milei government is also facing questions about the sustainability of its reforms. While controlling inflation has been a significant success, other indicators such as industrial production, purchasing power, and GDP continue to decline. Sergio Chouza, an economist, commented: "There's nothing to celebrate when every other economic indicator is worse, except for inflation."

Although President Milei's approval rating remains high, at 56% after his first year in office, economic and social pressures pose a significant challenge. Milei makes no secret of the difficult realities facing the country, even warning citizens that they must "go through hell" before they can hope for improvement.

Milei's reforms have brought short-term stability, but the long-term path to Argentina's recovery remains fraught with challenges. Milei proudly calls it "the best government in history," but only time will tell whether he can truly lay the foundation for a sustainable future.

Ngoc Anh (according to AJ, DW)

Source: https://www.congluan.vn/lam-phat-giam-ngheo-doi-tang-o-argentina-post328347.html