EU to blame for high inflation in Belarus?
Andrei Tur reassured the public recently by saying that the government would manage to curb the inflation at the level of 8 percent per year. He said that despite the fact that inflation in the first quarter reached 4.1 percent.
Economist Alexander Chubryk says there is only one way to achieve this result: to write this figure. But it does not mean that inflation will be reduced. In order to meet the 8-percent target, inflation should be less than 0.5 percent per month.
“Tur said something which cannot be achieved. At the moment, there are no signs that we will meet the 8-percent maximum. Inflation has already reached 4 percent over the first three months… It means that it should remain at 4 percent after 9 months. It is easy to calculate that prices should also grow by 0.5 percent monthly. This is not doable in the Belarusian conditions”, Chubryk said.
Meanwhile, there is a queue of the lobbyists at the economy ministry who wish to raise prices for their products. If all of their needs are met, inflation will soar beyond 20 percent, according to Alexander Chubryk.
“If all the applications at the economy ministry are met, the inflation would jump to beyond 20 percent. I think that it will be at approximately the same level as last year: around 12 percent. It will not be lower for sure”.
Deputy economy minister Andrei Tur is confident that there is no basis for alarm. It is normal to have inflation higher at the beginning of the year. Economic instabilities in Europe could be the only threat, according to Tur.
“The situation shows that we should not have a problem. However, the external factor is quite dangerous. Yesterday I checked that inflation in Belarus was 4 percent. In the European Union, inflation in the first quarter reached 3.6 percent. In Russia, inflation is even higher at 4.6 percent. It also affects the situation here…”
The government will not use any artificial measure in order to curb inflation, Andrei Tur said. Economist Alexander Chubryk says that even if the government tries to do it, it would fail anyway. He says are enterprises are smart enough to know how to evade regulations.
“For example, they make a new product; the same or even worse than the previous one. But this is a new product which will require a new price. This method was widely used in 1999”.
In the words of the economist, the only thing that could be done is to allow producers to set their own prices. Out of 4 percent of inflation, a half is caused by the government. Prices should be regulated by the market. But even in this case, there will be no immediate effect.
“I think that the government cannot do anything to control inflation. The only thing the government should do is to stop regulating the prices. This will allow the market to adapt to new conditions. But even with these measures in place, inflation can not be retained at the level of 8 percent.
According to the Ministry of Statistics, prices of goods and services grew by 4.1 percent in March against December 2007. In the same period, inflation in the utilities sector reached 20.3 percent. Last year, inflation amounted to 12 percent per year against 6-8 percent of forecasted targets.
