By Hernan Nessi
BUENOS AIRES (Reuters) - Argentina's monthly inflation rate likely soared to 28% in December, which would be the highest since early 1990, driven by a sharp devaluation of the peso currency last month by the new government of libertarian President Javier Milei.
The median forecast from 20 local and foreign analysts polled by Reuters underscores the challenge facing the South American grains giant, with annual inflation set to top 200% for the year, one of the highest rates in the world.
Milei, a political outsider who took office in mid-December on the back of voter anger at the political elite, directed an over 50% devaluation of the embattled, artificially strong peso currency that remains held in check by capital controls.
That unleashed a wave of pent-up inflation, with food, apparel and transport costs adjusting sharply in the wake of the devaluation, which was aimed at narrowing a huge gap between the official exchange rate and widely used parallel rates.
"The acceleration was clearly pushed by the accommodation of prices that was artificially delayed," said Eugenio Mari, chief economist of the Libertad y Progreso Foundation.
"The main driver was the wholesale exchange rate. This pushed up the prices of tradable goods, especially notable in food and beverages, which increased around 35% monthly."
The analyst projections ranged from 16.9% to a maximum of 31.5% for the month. The official INDEC statistics agency will release the official data on Thursday.
The rampant inflation, which has steadily risen higher in recent years on the back of deep fiscal deficits, low confidence in the peso and money printing to finance the government, is a key part of Argentina's worst economic crisis in two decades.
Net foreign currency reserves are deep in negative territory, two-fifths of the population is in poverty, huge debt payments are looming, and the government is racing to revamp a $44 billion loan program with the International Monetary Fund.
Milei, who has warned about the risk of hyperinflation without his planned austerity measures and spending cuts, has recognized that inflation will likely come in around 30% in December, though he has said it could have been worse.
Lucio Garay Mendez, an economist at the consulting firm EcoGo, said he expected inflation of 29.1% for December and the annual rate to be around 222%, with more price increases this year.
"For 2024 there will be new increases, especially in regulated prices, which are those that were furthest behind in the previous management, such as prepaid insurance, fuel, public transportation, electricity and gas rates," he said.