By Guido Nejamkis BUENOS AIRES, Nov 12 (Reuters) - Inflation is gathering speed in Argentina, but President Cristina Fernandez is gambling that she can focus instead on stoking economic growth ahead of next year's election. With the economy already set to grow 9 percent this year and unemployment falling, inflation of about 25 percent could become the president's Achilles' heel, and her critics are seizing on the issue. Summer tourism and Christmas shopping make the last quarter of the year traditionally a time of higher prices in Latin America's No. 3 economy, and analysts are also raising inflation forecasts for next year. That is putting the government's disputed inflation data under even closer scrutiny. "There's no monetary policy whatsoever. The policy is just to grow as much as possible. This is very worrying," said former central bank chief Aldo Pignanelli. Economic analysts say inflation is being fueled by brisk public spending, which is growing at an annual rate of about 32 percent, and the government's controversial use of central bank profits and reserves to pay debt. Buenos Aires-based consulting firm Orlando Ferreres and Associates has raised its forecast for next year's real inflation to 30 percent from 28 percent, chief economist Milagros Gismondi told Reuters. She said forecasts for this year had been revised upward to 26 percent from 25 percent. That is roughly in line with public-sector pay awards and more than twice the 11.1 percent reported by the state-run INDEC statistics agency in the 12 months through September. Argentina currently has the second-highest inflation rate in Latin America after Venezuela, where consumer prices are expected to rise by between 26 and 29 percent in 2011, according to Venezuelan analysts' estimates. Food prices are stoking overall inflation, particularly heavily weighted beef prices, analysts say. That is bad news for Fernandez because it means her support base among the poor is being hit hard by inflation, despite falling unemployment. Inflation has been high for at least four years, however, and Fernandez's approval ratings picked up on the back of the economy's strong economic recovery this year -- meaning she is unlikely to change tack on monetary policy now. The government of Fernandez, who has continued the unorthodox economic policies of her late husband, former President Nestor Kirchner, plays down price rises. Officials also dismiss the private inflation forecasts that double or triple the rate published by INDEC, which is due to release October's data on Friday. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphic: http://r.reuters.com/gyp94q ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ INDEC's inflation data has been widely discredited since January 2007 when Kirchner replaced the head of the agency's price unit with a political ally. Critics accuse the government of under-reporting inflation for political gain and to save money on debt payments. About a quarter of Argentina's debt load is made up of inflation-indexed bonds, and consulting firm Analytica said the underestimation of inflation had saved the state some $1 billion in repayments in the first half of 2010. But Fernandez appears unwilling to reform INDEC data and her government's 2011 budget bill sees inflation of 8.4 percent. Government officials have tentatively acknowledged rising food prices, blaming the problem on shopkeepers and companies and repeatedly rejecting orthodox monetary policy solutions. "The people who are talking about inflation are doing so from a monetarist perspective," Central Bank chief Mercedes Marco del Pont, a government ally, told the Senate this week. Argentina's central bank does not have an inflation-targeting regime, reflecting the government's control over monetary policy, and Marco del Pont blames price rises on supply bottlenecks. Many economic analysts think otherwise, citing the use of central bank reserves to pay debt and brisk public spending, which look set to increase in the run-up to the October 2011 election in which Fernandez may seek a second term. The economic policies of other possible presidential contenders remain unclear, but all of them have seized on concerns' about inflation in a country that suffered hyperinflation only a few decades ago. But for Fernandez, it looks like a gamble worth taking. "The government's betting that growth will help gloss over inflation. The urge to consume is going to be so strong, and the risk of that is that inflation starts to run away with you," said political analyst Vicente Massot. (Writing by Helen Popper; Editing by Padraic Cassidy) (helen.popper@thomsonreuters.com; +54 11 4318 0655; Reuters Messaging: helen.popper.reuters.com@reuters.net)) Keywords: ARGENTINA ECONOMY/INFLATION (For help: Click "Contact Us" in your desk top, click here or call 1-800-738-8377 for Reuters Products and 1-888-463-3383 for Thomson products; For client training: training.americas@thomsonreuters.com ; +1 646-223-5546) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved.
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