Market Analysis by Quasar Elizundia, Expert Research Strategist at Pepperstone
January 15, 2025 –
“Argentina’s economy closes 2024 with a remarkable inflation slowdown, marking a turning point after years of high price volatility. Official data from INDEC confirms an annual inflation rate of 117.8%, a figure that, while still high, represents a significant reduction of nearly 90 percentage points compared to 2023. This decrease exceeds initial projections, reflecting the impact of the economic policies implemented by Javier Milei’s administration.
December’s inflation rate, at 2.7%, was slightly above the 2.4% recorded in November but below the 3% expected by some analysts. This slight acceleration is primarily attributed to seasonal factors, with specific increases in sectors like education and recreation, both showing a 5% rise. However, it is crucial to highlight that the food and beverage sector, a key component of the basic consumption basket, saw a moderate increase of 0.9%, acting as a significant counterbalance to inflationary pressures. This sectoral divergence underscores the complexity of the inflationary landscape and the need for a nuanced analysis.
Reducing inflation to below 120% in 2024, down from 211% the previous year, represents a significant achievement and a clear indication that the economic policies are working. This sends a strong message to markets and boosts investor confidence.
The downward inflation trajectory opens up an optimistic outlook for 2025. Projections for the calendar year indicate a quarterly CPI of around 2% in the early months, with one-year inflation expectations near 30% and two-year expectations at 20%. These forecasts, although subject to global and local economic developments, reflect a consolidation of the downward trend and a strengthening of credibility in the economic strategy.
A key factor in this process has been the implementation of a robust fiscal anchor. This fiscal discipline has provided the Central Bank with the necessary tools to restore its balance sheet and exert greater control over medium- and long-term inflation expectations. Fiscal stability thus emerges as a cornerstone for the sustainability of inflation reduction and the strengthening of Argentina’s economy.
While the progress achieved is commendable, it is important to recognize that there is still a long road ahead. The commitment to macroeconomic stability and the implementation of responsible policies must remain a priority for Argentina. Consolidating the inflation slowdown is essential to lay the groundwork for sustainable and equitable economic growth.
This progress is a positive development for Milei’s administration, which has set its primary goal to correct macroeconomic imbalances and restore public finances. Nonetheless, the need to continue working to solidify these gains and ensure lasting economic stability remains essential.”
Analysis by Quasar Elizundia, Expert Research Strategist – Pepperstone