Argentina Looks to Rebase Inflation as Economy Returns to Normal

  • CPI to have a new base year once effects of reforms subside
  • Argentina expects IMF to lift censure motion by end of August

Argentina’s revamped statistics agency is likely to conduct a complete survey of spending habits in 2017 for the first time in 13 years, setting a new base year for its consumer-price index as the government finishes removing subsidies.

The Argentine economy should return to “normal” next year as most of President Mauricio Macri’s reforms are completed and inflation slows, said Jorge Todesca, director the national statistics agency, Indec. A previous household survey conducted in 2012 and 2013 was judged “deficient” and was discarded by Indec, he said.

“It’s statistically reasonable for your base year to have the most characteristics of normality,” Todesca said in an interview in his office in Buenos Aires. “In 2017, if the government finishes adjusting relative prices and inflation slows, we’d be in a good position to do the survey.”

Macri, who assumed office in December, has removed subsidies on utilities and public transport as he seeks to close the largest fiscal deficit in two decades, causing some bills to rise by as much as 500 percent and pushing inflation to about 40 percent. The economic changes have coincided with a revamp of the statistics agency after Argentina in 2013 became the first country to be censured by the International Monetary Fund for publishing inaccurate data.

The IMF’s technical mission returned from a trip to Argentina on July 1 saying it was impressed by the country’s commitment to improving the quality of its figures. Managing Director Christine Lagarde will present a report to the IMF’s board of directors in August, according to a statement.

Todesca said he expects the IMF to lift its motion of censure after the meeting.

Lifting Censure

“We’ve opened the doors and much more than the doors - the reports, the data, the procedures,” he said. “It seems to me that’s enough for the censure motion to be lifted and that’s what I think will happen.”

Todesca, 69, said he inherited a statistics agency in disarray. Most of the senior officials resigned before the new government assumed office and there’s evidence that some of the data was destroyed. The Indec has reported the matter to the police, Todesca said.

Indec produced the first results of a new inflation index in May. Prices in the Greater Buenos Aires area rose 4.2 percent from the previous month, Indec said June 15. Argentina will begin to publish annualized inflation once it has a year of data with which to compare, Todesca said.

Indec last month published revised growth numbers for the past decade. The results showed that contrary to the previous government’s claims of a period of 12 years of continuous growth, the economy in fact contracted in 2009, 2012 and 2014. Indec has no plans at the moment to set a new base year for gross domestic product, Todesca said.

The agency is also relaunching a household income survey that will allow it to report on poverty figures for the first time since 2012. Todesca said his team doesn’t have enough time to investigate what happened under the previous administration as it attempts to revamp the 85 economic indicators it publishes each year.

“To look back at the past is important but the priority is to build for the present and the future,” Todesca said.

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