2023-11-29 14:15:00
The new president of Argentina Javier Milei anticipated in recent hours that the Argentina will face stagflation in the first months of what his management will be like. For the president who will take office on December 10,The first part of his mandate will be marked due to an economic decline accompanied by high levels of inflation.
Upon his return from the United States, Javier Milei spoke with Radio La Red and stated bluntly: “There is going to be stagflation. Because when you carry out the fiscal reorganization it will have a negative impact on economic activity. That is why I say that the only wallet that is open is that of human capital to support the fallen,” he said.
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When asked about the future of prices in the coming months, he pointed to this economic phenomenon..
“That’s why I say that the only wallet that will be open is that of Human Capital to provide support for the fallen,” he added and along the same lines he assured: “LInflation has to do with what you did in monetary policy 24 months ago and that has already been decided, It was already done. Monetary policy acts with delays,” he commented.
“Inflation is in play, why? Because it has to do with what you did two years ago. Inflation is going to remain high because it is the result of the disaster that this Government made. We are creating all the mechanisms to stop the issuance of money so that in a period of between 18 to 24 months we end inflation. That is the empirical evidence of the Argentine case. Convertibility, which worked under that same rule, took 20 months,” Milei added.
What is stagflation?
It is worth considering that stagflation is a scenario that combines the stagnation of the economy with a high price increase. Experts usually agree that the country is in a contextor recessive and inflation gives no respite.
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Stagflation is a term that arises from the combination of “stagnation” and “inflation” and is used to describe an economic situation. In this scenario, two phenomena coexist: a high rate of inflation and economic stagnationcharacterized by Gross Domestic Product (GDP) growth rates that are low or even negative.
This phenomenon can occur when an economy experiences high levels of inflation with significant increases in the prices of goods and services. and, at the same time, faces stagnation in its general economic activity.
Expert look
In dialogue with PERFIL, the economist Natalia Motyl He assured that this is not a new phenomenon for Argentina, but rather has a long history.
According to your view, “Argentina is in a difficult situation for many years of stagflation.”
The director of NM Consultora indicated thatand “since 2011 our country has not generated jobs and inflation went from moderate to rampant.”
Arriving at the point of explaining the phenomenon, he recalled that “stagflation is the union between economic stagnation (companies in a country do not grow, they do not focus on new projects and they do not generate more employment) and inflation (the prices of the things we buy go up a lot)”.
And between the consequences of the phenomenon pointed out “first of all, the fall in real wages (we buy less and less things); in second place, there are less jobs; in third place, Companies produce less and less due to inflation and economic stagnation; fourthly, sand invest less and less; Fifthly, collection falls, so The government has difficulty paying its obligations, increasing the risk of default; and finally sixthly, The crisis of confidence that ensures the outflow of capital worsens“, completed the specialist. Without a doubt, a vicious circle whose dynamics should be stopped as soon as possible.
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