Economist: Galloping Inflation Is about to Start in Belarus

A critical threshold has been reached.

From September 24, state regulation of prices for 30 categories of socially significant goods is extended - until December 31, 2021, inclusive. This was reported by the press service of the Ministry of Antimonopoly Regulation and Trade of Belarus.

The list includes almost the entire basic consumer basket, from salt and sugar to meat, fish, baby food.

On the other hand, the same MART, analyzing the situation in the consumer market of Belarus in August, noted that the rise in prices had stabilized, and, for the third month in a row, inflation remained at the level of 9.8% and was even lower for socially important goods - 8.4%.

Then why continue to artificially restrain prices, provoking, on the one hand, a deficit, and, on the other, a rise in prices for “unregulated” goods? Doctor of Economics Barys Zhaliba explains to Filin what the Ministry is guided by and what it will lead to.

- This year, the accelerated growth of world food prices is indeed recorded, and this was reflected, among other things, in prices within Belarus. The growth of sunflower oil prices is quite indicative in this respect; if I am not mistaken, it increased by 20% in spring.

State regulation of prices is a long-standing practice in our country. There are many opponents of the state interfering in the pricing process at all so that it is regulated entirely by the market. But the fact is that there are many pensioners in Belarus - about 2.5 million people, and the overwhelming majority have extremely low pensions. Therefore, the containment of prices for the outlined range of socially significant goods, especially food, is a necessary measure.

MART sometimes expands, sometimes narrows, or prolongs the previous restrictions, guided by, let's say, well-intentioned prices so that these groups of goods were also available to the low-income population.

In 2020, a government decree on state regulation of prices, which prohibited all entities from raising prices for goods and services over 0.5% per month, lasted only 16 days and was canceled after criticism from the business community.

But a year later, the practice of containment and "freezing" was resumed. In February, the Council of Ministers issued Decree No. 100 on the temporary limitation of prices for essential goods, which included 57 types of food products, 5 hygiene products and household goods, plus 50 medicines. Prices for them, starting from March 2021, were allowed to increase by no more than 0.2% per month.

During the year, MART extended the price regulation for socially important goods several times: in March, June, and September.

Officially, inflation in Belarus has recently been at the level of 9.8-9.9%, but the economist notes that the population has never trusted these figures to Belstat since it looks at the real prices in stores and has its own idea of how the situation has changed.

- This can be seen from the polls of the National Bank, in which the perceived and expected inflation rate is always slightly higher than the official figures - sometimes 14%, sometimes 16% per annum... Perhaps, MART extended the restrictive actions until the end of the year, taking these considerations into account, guided by the ideas of Belarusians about how prices are actually growing in our country, the expert says.

- No matter what officials and statistics say, prices are slowly growing, including for regulated goods (meat, according to the same MART, went up in price in August by 1.4%, milk - by 2.4%), but, in general, consumer prices have added 0.2% compared to July. Where to nod - high inflationary expectations, world prices, efforts of manufacturers?

- Producers, of course, have always been interested in raising prices because this provides them with the necessary profit. Moreover, according to statistics, our retail trade is low-profit - their return on sales is 1-2%, so they are also interested in making a larger trade margin.

Remember, this year we have witnessed the closure of many retail chains, such as Domashniy, Biggs, and others - they go bankrupt, and this process continues. Therefore, the increase in prices is the interest of both producers and trade, there is no getting away from this.

And MART is precisely engaged in limiting prices for food groups of goods, to which retail trade is especially sensitive. Therefore, there is a conflict of interest here: manufacturers and trade want greater profitability, and MART cuts off this opportunity.

I think this policy will continue - we will always have this "list of socially significant goods." If things are going well in the economy, this circle has always narrowed in terms of the nomenclature, if worse, it has increased.

Periodic exceptions that the ministry makes when allowing prices to go up (for example, in July 2021 - on milk, dairy products, margarine, in September - on meat and meat products), are aimed to somehow keep domestic producers and agricultural organizations afloat, the economist says.

- Besides, by the end of summer, the harvest ripens, and prices for vegetables and fruits traditionally go down. If everything is normal in the economy, we had the lowest inflation rates in August, sometimes even turning into deflation. This year, however, the indicators are atypical - I hoped that inflation would decrease, but it both jumped and remained at the level of 10% during all summer months.

Let me remind you that our economic authorities set the forecast for inflation growth at 5% per year. It is clear that then no one knew what the situation with the sanctions would be, but then this indicator will have to be revised. Now the main task is not to reach the double-digit number, because 10% is already a milestone, then inflation goes from moderate to galloping and, naturally, it will be much more difficult to contain.

- Now many Belarusians are worried about the issue of sugar: the price for it has not been growing for several months, and it has disappeared from stores, especially in the regions. Is this a seasonal shortage or should we expect price increases?

- I think that this is also a seasonal phenomenon. The period of preserves, pickles, jams, etc. begins in August-September. There has always been a high demand for sugar at this time.

And if it disappeared somewhere - this is a thorn in the side of MART, they had to react: either to make sufficient supplies, or to drive slow suppliers, or, perhaps, to raise the price of sugar to prevent the rush to buy.