Argentine Poverty Neared Pandemic Levels Before Milei Austerity

(Bloomberg) -- Poverty levels in Argentina rose slightly in the second half of 2023 as soaring inflation pummeled household spending power even before President Javier Milei’s shock therapy took hold.

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About 41.7% of Argentines were living in poverty in the second half of the year, up from 40.1% previously, according to government data published Wednesday. It’s just below the peak of 42% seen during the pandemic and only expected to keep rising as Milei cuts government spending largely with brutal austerity measures.

Annual inflation surging past 276% drove the country’s poverty rate, which is calculated based on the cost of a basket of household goods and average wages. By December 2023, the cost of those basic goods had already surpassed incomes, according to Buenos Aires-based consultancy Empiria. Paychecks plunged 11% in real terms in December from November, the largest monthly income loss since the government began keeping track 29 years ago.

Read more: Wages in Argentina Suffer Record Drop After Milei Devalues Peso

Since taking office Dec. 10, Milei devalued the currency by 54%, cut interest rates and allowed public spending to be undercut by inflation. Chainsaw-style, he also halted virtually all public works, slashed funding to the provinces and is on track to eliminate 70,000 government jobs.

To be sure, Milei has prioritized trying to shield poor Argentines from some of the austerity pain: Days before the poverty data the government approved new spending increases for some of the most common welfare programs.

Argentina’s economy shrank 1.9% in the fourth quarter of 2023, with economists forecasting an even sharper contraction of 3.5% in 2024.

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