Disinflation could prompt National Bank to lower interest rates in economy

May 15, 2017 12:23

According to Belstat, in April 2017 consumer prices increased by 0.7%, and since early 2017 inflation totalled 2.4%. April is traditionally characterised by seasonal growth in prices for fruit and vegetable products, which leads to an overall hike in prices for food products. Control over pricing policy is likely to persist, including through administrative means. The stability of the BYN is likely to have a stabilising effect on the prices of imported goods. Wage growth is unlikely to have a significant impact on consumer demand due to further increases in tariffs for utility and housing services. The main factor which may have an impact on price hikes, except seasonal one, is overemployment and pay rises in order to meet the president’s requirement – enterprises’ production costs would grow, hence, the final price of produces would increase. The target inflation forecast for 2017 was 9%. Currently, inflation in Belarus has slowed down to 6.3% per annum, enabling the National Bank to take further steps to reduce interest rates in the economy and help reduce enterprises’ loan servicing costs.

Similar articles

Amidst growing dysfunctionality of state administration Belarusian authorities continue to lose touch with population
July 17, 2017 11:27
Erik Sigerud, Post Mortem, 2009, oil and vinyl on canvas, 74.8” x 177.” Courtesy of the artist.

Amid budgetary cuts on social protection, the Belarusian public sector is experiencing a management crisis and a balance shift in the state resource redistribution system. The authorities are forced to revise their most unpopular decisions during the implementation due to the pressure from affected social groups. The state is unlikely to oppose to some civil society and opposition organisations in strengthening their role in society in order to retain touch with the population and to be able to respond to the most harsh criticism of state initiatives.

The Architecture and Construction Ministry has acknowledged that the decree No 585 on assistance to large and young families in building and buying housing was prematurely rescinded.

The authorities are often forced to revise their decisions on curtailing social assistance to different social groups during their implementation, without preliminary impact assessment and feedback from the population, so as they lead to the growth in social tension. Due to the centralised decision making, languishing state resources and the lack of public debate as a balancing instrument in issues related to social protection, the state administration is losing control of the population.

Perhaps, the compensatory mechanisms of the state apparatus lack the time to adjust to dwindling state resources for supporting the existing social model, even in a reduced form. The authorities have completely or partially paralysed operations of independent public institutions and representative bodies, through which they could monitor public moods and receive feedback from the population, such as local councils, the parliament, political parties and NGOs. Last year, under the pressure of the authorities, the last independent institute for measuring public sentiment, IISEPS, suspended operations.

President Lukashenka’s self-removal from the decision-making on current socio-economic issues, also could have affected the state apparatus’ operations. The president has always been very sensitive about adopting unpopular decisions which could lower his popular support, hence demanded a careful preliminary assessment of such decisions. However, recently, especially after the introduction of the tax on social dependants, the president has mainly focused on the foreign policy agenda.

Hence, a lacuna has formed in the state decision-making after the president reduced participation in the current socio-economic policy formation, which leads to an increase in manifestations of dysfunction in the public administration.