Only Administrative Measures Can Help to Implement the Inflation Plan for 2013

Belarus’ National Statistical Committee has published consumer prices index for 2012 and eight days of 2013.

Comment

In 2012, inflation forecasts were met. To meet the forecasts for 2012, an increase in some prices was rescheduled for 2013. An increase of excise duties, inclusion of VAT in the price of some services for individuals, growth in tariffs and rise of the tariff rate of the first category cast doubt on the feasibility of fulfilling the forecasted inflation indicator of 12% in 2013 .

According to the National Statistical Committee, inflation in Belarus in 2012 stood at 21, 78%, which is the top limit for 2012 forecasts. It was possible to fulfill this parameter due to administrative intervention and fighting inflation through regulating prices on socially important goods and services. Also, it was fulfilled due to drawbacks in the methodology for calculating inflation, which does not take into account how Belarusian manufactures set prices.

Obligations within Anti–Crisis Fund requirements to cover housing and communal services costs, as well as transport costs were not fulfilled. The government has chosen a steady rise in prices for housing and communal services for the population to a fold price increase. Price rises for transport services were restricted and partly postponed to 2013. Train ticket prices rose as of January, 1, 2013. From January 1, 2013 costs for heating and electricity for the population have increased by 5% and 9.5%, respectively.

From January 1, excise taxes on tobacco, alcohol and fuel have also increased, which will result in a steady increase in prices for these goods, due to the usual practice of transferring the additional cost to the consumer. High interest rates on ruble loans starting from October, 2012 will be gradually transferred to the cost of production. Unfavorable prices on a number of food products on foreign markets will be compensated by price rises on the domestic market. A sharp increase in national rail transportation costs will be reflected in the growth of costs for industrial products. As of January 8, a price increase accounted for 1.5% as compared to the average prices in December.

Thus, without certain administrative manipulation of prices, in a situation when the cross-subsidization of the Belarusian population steadily decreases and excise taxes on a number of goods are to be increased, it is not possible to meet forecasts for inflation in 2013. IMF forecasts for 2013 assume inflation equaled to 29.6%, and this version seems to be more realistic than the government’s plans to reduce inflation to 12% in 2013 as of the end of the period.