Revoking price regulation will not lead to price hikes

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April 22, 2016 19:10

Administrative price regulation introduced in December 2014 in order to prevent inflation after the devaluation, has partly fulfilled its tasks, but also led to deterioration in financial performance of trade. Amid falling incomes and slowing down devaluation, inflation risks have decreased substantially and the government has abolished tough price regulation (decree no 250 of March 3rd, 2015). In current economic realities, lifting the ban on price hikes is unlikely to lead to a rapid rise in the cost of imported goods. 

In December 2014, the Council of Ministers adopted decree No 1207, which imposed a moratorium on the rise in prices and tariffs of natural monopolies. Other organizations could not rise prices compared with their level on December 18th, 2014. By adopting such measures, the government aimed to restrict inflation amid devaluation of the national currency. When Belarusian rouble somewhat stabilised in January-February 2015, the Trade Ministry issued several regulations abolishing restrictions on prices. As of April 2015, all restrictions on prices were lifted. 

Restrictive measures helped to keep prices at bay in Q1 2015. According to the National Statistics Committee, in January-March 2015, consumer prices increased by 4.9% compared with December 2014. In the same period, the national currency has depreciated against US Dollar by 35%. Nevertheless, deficit on some goods was an inevitable backlash to these measures. Financial health of wholesale and retail enterprises has significantly deteriorated – losses in January 2015 alone totalled BYR 4.6 billion. 

Lifting of all restrictions on price regulation would not lead to a rapid rise in the cost of imported products. The devaluation has significantly trimmed people’s purchasing power, and persisting negative trends on the labour market will lead to further decline in turnover. In the given circumstances, importers will focus on supplies of cheaper consumer goods. 

Administrative restrictions on price hikes in Q1 2015 have been lifted. Prices will continue to grow, but will be limited by reduced incomes and reduced consumer spending.