Argentina’s inflation rate, some conclusions of the Davos Forum, World Economic Council
An issue of special interest for businesspeople that considers doing business with Argentina is its very high rate of inflation. For the Davos Forum of the World Economic Council, professor Martin Feldstein of Harvard commented on the present fight against inflation and the perspective for the future.
According to Feldstein, the country’s present inflation rate is of 20% annually, significantly below the 40% of last year. He acknowledges the Central Bank’s struggle to keep the economy on a disinflationary path, to achieve a 5% rate in the next three years.
At the same time professor Feldstein points out the political cost of this struggle, as a tight monetary policy and high interest rates decreased demand and resulted in a lower GDP. In his view the public does not easily perceive the difference between 20 and 40% of inflation. Thus, the government does pay a short term political price.
Professor Feldstein sees in the Argentine case a lesson for other countries that may be tempted to allow now a high rate of inflation without foreseeing the political costs that will have to be paid in the future.