2023-08-12 10:10:22
The picture is illustrative
Inflation in Belarus remained at the level of 0.3% in July. On an annualized basis, the consumer price index continued to decline. Experts predict that the figures will begin to grow in the fall. At the same time, analysts noticed that an inflationary overhang began to form, which, if no action is taken to eliminate it, could shoot out in 2024.
Ilex.by writes about it.
By the end of July, monthly inflation in Belarus was the same as in June – 0.3%, Belstat reports.
Eggs (+2.3% versus June), TVs (+1.2%), sugar (+1%) and medicines (+0.8%) were the leaders in terms of price growth, while vegetables and fruits lost 9 .2% and 3.3% respectively.
Of the services, rail transport (by 6.6%), air transport (3%), tourist services (2.7%) and housing and communal services (0.8%) rose in price most of all over the month.
Compared to December 2022, prices increased by 3.3%. The largest increase was observed in services – by 6.2%. Products became more expensive by 3.2%, non-food products – by 1.1%.
Annual inflation in July 2023 was 2.7%, which is 0.2 percentage points lower than in June. Services and food products rose in price by 7.1% and 3.9% respectively. But non-food products fell in price by 2%.
In July, the experts of the Eurasian Development Bank predicted a decrease in annual inflation in Belarus in the coming months to 2-2.5%. Accelerated growth in consumer prices is expected in the fourth quarter. The main factors will be a possible easing of administrative price controls, the effects of the weakening of the Belarusian ruble and the growth of domestic demand against the backdrop of rising real incomes and expanding lending. EDB’s base inflation forecast is 7.8% at the end of 2023.
The Ministry of Economy also acknowledges that now “inflation is below the target trajectory.” But it is expected that by the end of 2023 it will be close to the target parameters (7%).
According to a member of the board, head of the Main Department of Monetary Policy and Economic Analysis of the National Bank of Belarus Dmitry Murin, the slowdown in annual inflation from 17.6% in June 2022 to 2.9% in June this year is due to restrained domestic consumer demand, the strengthening of the Belarusian ruble against against the Russian ruble, slowing inflation in the Russian Federation and a decline in world prices for raw materials and food.
At the same time, he noted that the current 12-month inflation indicator includes an adjustment in the fourth quarter of 2022 of the relative prices of the consumer market, associated with the entry into force of Resolution No. 713, which approved the new pricing mechanism. Nevertheless, according to the National Bank, the dynamics of quarterly values of the consumer price index, cleared of the structural shift caused by the use of this mechanism and the influence of seasonality, also has a downward trend. According to the regulator’s calculations, without taking into account the impact of Decree N 713, this figure could be slightly higher than the current value.
Economist Anatoly Kharitonchik believes that a long-term combination of total price controls and excessively loose monetary policy will lead to the accumulation of an inflationary overhang. This is fraught with large potential costs in the form of a price spike and a sharp tightening of monetary policy in 2024. A. Kharitonchik noted that the regulator pointed to an inflationary overhang due to the operation of Decree N 713. According to the expert, “the inflationary overhang is not critical yet, but will accumulate if decisions are postponed” to eliminate it.
According to Dmitry Murin, the dynamics of consumer prices in Belarus is still influenced by a number of internal inflationogenic factors. One of them is the high inflationary expectations of the population and businesses. They are still many times higher than the actual inflation.
A more fundamental and long-term factor is the increased cost intensity of the production of Belarusian goods and services with insufficient productivity of production factors. Thus, the share of material costs of Belarusian enterprises in the total costs over the past five years has been steadily at a level above 60%. According to this indicator, they lose, among other things, to Russian manufacturers (55%). In general, in the Belarusian economy, the average labor productivity over the past five years is at a level of less than 1%, Murin notes.
To reduce the influence of this factor, systematic work is required to implement, as a matter of priority, investment projects aimed at the technical re-equipment of domestic enterprises and building highly efficient business processes, the National Bank believes.
Anatoly Kharitonchik noted that pro-inflationary pressure has prerequisites for strengthening due to a shortage of workers, which leads to an increase in wages against the backdrop of low labor productivity.
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