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The State Thimblerigs at the Expense of "Spongers"

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The State Thimblerigs at the Expense of "Spongers"

Inflation may launch in Belarus.

Belarusians have long lived under the inflationary consumer model (a lot of cheap money, rapidly rising prices). They spat, cursed it, waited for another devaluation, ran to exchange offices, bought in an assortment of entire trading networks in neighboring states, but eventually somehow got adjusted. This July an alleged "deflation"was recorded in Belarus: there is lack of money, it is expensive.

The demand was nailed with slender purse, prices - with drop in deman. These are ordinary consequences of a tight monetary policy: whether you want it or not, lack of money causes cuts in costs and the income to overpay for goods and services (or just to purchase them). However, the July deflation in Belarus is a single indicator but not a long-term tendency, Belgazeta writes.

For decades a consumer has been accustomed to the opposite scenario: first the state pours in funds into key industries, and then the inflation game with an inevitable end - devaluation - starts. Inflation expectations remaine quite high, however, it is even worse that they unwillingly promote inflationary tendencies in the economy.

The government plainly connects the state of the consumer market with the social feeling in 2015-2017. People complaimed more about price growth than about drop in incomes. The inflation factor prevails over the package of documents on stimulation of business activity - increasing competitiveness mostly aims to increase the supply, promote the drop in prices and inflation expectations. The beginning of the autumn is the very time to experiment.

Minister of Economy Uladzimir Zinouski insistently repeats in his recent interviews that he does not see prerequisites for price growth: "We have decided not to launch the price growth having no good reason; there should be competition in the market. We take a careful eye on it. Our Ministry on Antimonopoly Regulation and Trade (MART) works good in pricing. A strict assessment is delivered if someone violates antimonopoly legislation. One doesn't need to wait a price growth!".

The recovery of the consumer demand is associated with the risk of rising inflationary pressures that can cross out recent achievements of the National Bank. Therefore, it is planned to keep a lid on the demand artificially.

In general, the dynamics of consumer prices continues to become increasingly homogeneous. There is a progressive distribution shift of increasing prices and tariffs toward an increase in the proportion of positions, prices for which "have not changed or decreased in annual terms." This tendency exists, however, neither Mart nor the National Bank have not managed to fully curb the Belarusian pricing. Hencethe desire ofthe economic sector to reinsure in the face of the inflationary expectations.

Who does pay for it?

As usual, Belarus emerges from the crisis at the expense of an ordinary consumer. The growth in exports has caused a slight increase in GDP, but has had almost no response in the domestic market and in the household consumption: signs of recovery in demand are still poor even in Minsk. According to the EDB, "the main factors of stabilization of inflationary processes are still poor consumer activity, moderate growth in money supply, relative stability of the national currency."

Authors of the macro-review mention "a gradual recovery of retail trade turnover which May growth has reached the highest values in recent years and amounted to 2.9% compared with May 2016" as a positive signal. According to EDB analysts, in the II quarter it makes possible "to reach positive values of spending behavior for private consumption after the slowdown to 0.6% y/y in the I quarter of this year" (-2.9% as of year-end 2016).

However, let us pay attention to the experts' conclusion about the fact that due to what inflationary pressures are blocked and demand is frozen: "Restricting factor for the recovery of the consumer market is the continuing decline in real disposable money income of the population, which decreased by 1.5% in January-April 2017 compared to the corresponding period of the previous year."

BelGazeta paid attention to this figure in May when Prime Minister Andrei Kabyakau self-critically acknowledged that "only one of 7 key indicators was not fulfilled - the real disposable money income of the population - 97.8% to the level of the previous year". And in fact last year incomes also reduced. As well as in the year before last... It has been lasting for the third year in a row...

"Sponger" riots of February-March of 2017 are caused not mainly by Decree No.3 (with all the administrative-fiscal madness of its first edition) and not even inflation fight at the expense of the population, but economic practices of previous decades. These very practices have provoked inavitaability of the inflation, tightening of the monetary policy, manual revision of the labor market with the persecution of "spongers".

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