Inflation continued to rise and was measured by the increase in consumer prices, in September it amounted to 0.8 percent compared to August, while it increased by 5.7 percent compared to the same month last year. In September, food and non-alcoholic beverages rose the most on a monthly basis, by 2.3 percent, followed by restaurants and hotels by 0.8 percent, housing, water, electricity, gas and other fuels by 0.5 percent. Recreation and culture became cheaper by 2.4 percent.
Economist Ljubomir Madzar says that it is bad that inflation has risen, because it is difficult to stop it and return it to normal.
– The increase in inflation has taken off all over the world and that is why there is no place for criticism of economic policy in that area. If it goes out of the box then it’s worrying because it’s hard to get it back to normal. It leads to a decline in gross domestic product, rising unemployment and a foreign trade deficit. Because, there is a danger that the control of aggregate demand affects not only prices, but also quantities, and that leads to a decline in economic activity – notes Magzar.
The National Bank of Serbia (NBS) states that almost 60 percent of year-on-year inflation was determined by factors that monetary policy cannot influence, and those are the prices of unprocessed food and energy, which make up one quarter of the consumer basket. These two groups of products, taken together, contributed to year-on-year inflation with 3.3 percentage points.
– Prices of unprocessed food in September this year, compared to the same month last year, were higher by 17.9 percent, mostly as a result of higher prices of vegetables by 36.2 percent and meat by 15.1 percent. Such trends are the result of strong growth in food prices at the global level, as well as the effect of last year’s low base, because the prices of both product groups during 2020 were at extremely low levels. To a lesser extent, the year-on-year rise in the prices of unprocessed food in September was also contributed by the rise in fruit prices of 6.2 percent – the central bank explained.
Energy prices increased by 9.5 percent in the same period, primarily as a result of strong growth in oil prices on the world market and reaching its pre-crisis level, which increased the price of oil derivatives on the domestic market by 16.3 percent compared to September last year, when prices were at a much lower level.
– The cause of the increase in year-on-year inflation compared to August’s 4.3 percent is still the prices of unprocessed food, primarily vegetables, which had a seasonally unusual movement throughout the third quarter, among other things, due to unfavorable weather conditions and drought during the summer months. To a lesser extent, the prices of meat and fruit, as well as certain services, contributed to the acceleration of inflation in September, according to the NBS.
Year-on-year core inflation (consumer price index excluding food, energy, alcohol and cigarettes), which may be affected by monetary policy measures, was again significantly lower than headline inflation in September and stood at 2.6 percent, indicating the temporary nature of inflationary pressures. Since the beginning of the year, year-on-year core inflation has been at around two percent, which is largely the result of preserved exchange rate stability. The temporary character of inflationary pressures is also indicated by the inflation expectations of the financial sector for one, two and three years ahead, which are still around the level of three percent, as well as the inflation expectations of the economy, which range from two to three percent.
According to the NBS projection, year-on-year inflation will most likely continue to move above the upper limit of the target range of three plus or minus 1.5 percent in the next two quarters. From the second quarter of next year, year-on-year inflation is expected to return to the target, and then from the second half of the year, its movement around the central value of the target, which will certainly contribute to maintaining exchange rate stability in the coming period. Given the high base from this year, there is a possibility that in the second half of next year, overall inflation will be in the lower half of the target range. Risks in terms of inflation in the forthcoming period are primarily related to the movements of unprocessed food prices and global energy prices, Politika reports.
