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Control of inflation critical for Argentina.

"Investment can't work miracles," a local economic analyst told Reuters during an interview for a story on January 15, 2007. The story was about Argentina's continuing battle with inflation, which seems to be the major ongoing Argentine issue covered by the international financial press.

The reference to "investment" characterizes the economist's remark as a comment about the limitation of the investment/export model Argentina used to right itself after the economy capsized in storm of default in 2001/2002.

Argentina's inflation is a consequence of the country's rapid growth since 2003. GDP expansion in from 2003 through 2006 has not fallen below 8.0 percent, according to September 2006 International Monetary Fund (IMF) estimates.

Growth in the rate of inflation was out of double digits for only two of those years.

During 2006, though, the government did meet its goal of getting the rate of inflation itself down below double digits, but just barely, according to the Reuters report. The rate of inflation for 2006 was 9.8 percent.

Prospects for 2007 are not favorable. Reuters surveyed 14 local economists and asked them to predict what the rate of Argentine inflation might be for 2007. The economists came back with estimates ranging from 9.5 percent to 12.0 percent. The median was 10.6 percent. A similar poll by the Central Bank of Argentina (BCRA) arrived at an inflation rate of 10.0 for 2007.

The government's tactic to get inflation down below 10.0 percent in 2006 was to resort to price controls. At best, this is a short term solution, so inflationary pressures are likely to increase during 2007.

If the IMF's reasoning is correct, and the rate of inflation will increase 11.4 percent during 2007, it means that Argentina will be contending with a rate of inflation just shy of 11.0 percent.

According to the New York Times (New York) (January 6, 2007) inflation is hitting the poor harder than the rich, making it more difficult to build an increasingly prosperous middle class.

JOBS COMPETE WITH INFLATION AS A CRITICAL ISSUE FOR ARGENTINA

The population growth rate for Argentina is lower than the regional average, due in part to a birth rate of 18 per thousand inhabitants, which is below the average of 21 per thousand for South America. Job creation has not kept up with growth of the labor force in recent years, and it is unlikely that the situation will improve further in 2007.

Unemployment is running about 11.6 percent (2005), and this continues to undermine consumer confidence.

Argentina's population reached 39-million people mid-2006, which amounted to just over 10 percent of South America's 378-million inhabitants. According to data released by the Population Reference Bureau (PRB), Argentina's population will reach 46-million by 2025. Also, according to that source, Argentina is going to have a population of 54-million people in 2050.

The PRB revealed that a large 89 percent of Argentina's population lived in urban areas during 2006, and that the country's population density is a low 36 people per square mile. Argentina is 12 percent bigger than all of Central America, but Central America has nearly four times as many inhabitants. The CIA's World Factbook, estimates that 25 percent of Argentina's population was birth to 14 years old in 2006, 64 percent was 15 to 64 years old, and 11 percent was 65 years of age and over.

The CIA Estimated the country's population growth rate at 0.96 percent in 2006. According to the United Nations Population Division, in the year 2050, 20 percent of Argentina's population will be birth to 14 years old, 57 percent will be aged 15 to 59, and 23 percent will be 60 years of age and over.
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Title Annotation:population growth and inflation
Publication:Market Latin America
Geographic Code:3ARGE
Date:Feb 1, 2007
Words:623
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