Leading experts on the Argentine economy disagree with the governor of the country’s central bank, Martin Redrado, when he says that the institution has only a limited role to play in fighting inflation in the country because of the low level of credit.
According to the state body in charge of measuring inflation, Indec, the rate is 9.6% (although leading local economists say the true figure is around 15%).
In an exclusive interview with Euromoney, Redrado says that total credit against GDP in the country is only 10%, while before Argentina’s economic crisis of 2001 it was 25%.
He says: "This means that there is 90 per cent [of the economy] where it is very difficult [to fight inflation]; you don’t have all the levers to control it. Therefore, in our analysis, there should be a combination of a monetary and a wage policy, targeting a primary fiscal surplus of 5.5% of GDP. Argentina now has a non-financial primary fiscal surplus of 3.5%.
"In an economy in transition – where prices have been going up in natural gas and transportation, for example – there has been a delayed pass-through of prices after the devaluation.