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August 28 – September 3, 2017

Increase in wages and priming of economy could lead to inflation mid-term

The situation has not changed

According to HSE analysts (The Higher School of Economics, Russia), despite the gradual reduction in inflation in Belarus, a reduction in consumer loan rates, higher wages and pensions, and an increase in concessional lending would eventually lead to inflation in the medium term. According to Belstat, July 2017 was marked by deflation, which led to a 0.1% decrease in consumer prices. Since early 2017, prices have increased by 3.3%. An increase in tariffs for utility services is on the way. Due to the increase in the labour cost at enterprises amid pay rises, prices for food products and some non-food products are likely to increase. Modernization of refinery requires additional funds, which would lead to an increase in petrol prices. Inflation could be deterred due to a reduction in loan rates for industry and importers. If the national currency depreciated and inflation accelerated due to rising import prices, the state would resort to pricing regulation, which, in turn, would have a negative impact on financial health of producers and importers.

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Once a week, in coordination with a group of prominent Belarusian analysts, we provide analytical commentaries on the most topical and relevant issues, including the behind-the-scenes processes occurring in Belarus. These commentaries are available in Belarusian, Russian, and English.
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