The Government of Argentina is grappling with a significant increase in poverty. Following a devaluation in December and a 25.5% increase in inflation – the highest in 30 years – it is estimated that nearly half of the population is living below the poverty line. This figure has not been seen for two decades and has been included in Argentina’s letter of intent as part of the International Monetary Fund’s staff report.
The country’s Minister of Economy, Luis Caputo, and the head of the Central Bank, Santiago Bausili, have indicated a new economic strategy is being charted. Despite this, the officials warn that the country has inherited the “worst inheritance in history”, with falling salaries and increasing poverty and informality.
The report indicates that over half of Argentinians are currently living in poverty, a figure that is estimated to be close to 60% for children. This is a 5-point difference from the IMF’s preliminary estimates.
The IMF report warns of a rising trend of poverty in Argentina, driven by increasing prices and decreasing real wages of informal workers.
Late data from INDEC indicates that poverty was at 40.1% in the first semester, which is almost 4 points higher than the same period in 2022. However, the UCA Social Observatory suggests that poverty rose by 6 points in the fourth quarter.
The IMF notes that Argentina has a broad social safety net, with a fiscal cost of 3.7% of GDP. However, with inflation rising and rate increases projected, they suggest a temporary extension of specific social aid to protect the most vulnerable.
The President of Argentina has warned of difficult months ahead. In response to these concerns, the government has postponed a planned increase in the gas rate and is considering its approach to the official dollar.
Despite these challenges, experts suggest that poverty has not increased further due to the recession not yet impacting employment, especially in informal sectors. Nonetheless, it is anticipated that poverty will continue to rise.
According to economist Agustín Salvia, the most affected groups are likely to be young families without children, adult workers with older children and retirees. If the government maintains its current strategy, the adjustment in this sector could be significant.