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Inflation will be around 13 percent this year

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Due to the increase in excise duties and the announced increase in the price of electricity and gas, annual inflation will amount to around nine percent in the last quarter of this year, while the growth of retail prices this year will be 13 percent, according to the forecast of the Republic Institute of Statistics (RZS).

“For the last quarter of 2023, an eight percent increase in excise duties on fuel, cigarettes and tobacco products, alcoholic beverages and coffee has been announced. Also, in the arrangement with the International Monetary Fund (IMF), since the beginning of 2023, another increase in the price of electricity for households in November has been agreed, in addition to the increase in January and May, of eight percent and around ten percent.

Calculating these announced changes in excise taxes in the model of the leading indicator of consumer prices in the fourth quarter of 2023, a year-on-year growth in consumer prices of about nine percent is forecast, which would keep the average inflation of consumer prices in the whole of 2023 at a level of about 13 percent, according to RZS.

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The extraordinary increase in excise duty on cigarettes of eight percent in October 2023 will contribute to the average increase in cigarette prices by about seven dinars, which would be an increase compared to the third quarter by 1.8 percent, i.e. by 7.8 percent compared to the third quarter of 2022.

The increase in excise duties on alcoholic beverages will increase their current contribution to price growth compared to the third quarter of 2022 by about 0.1 percentage point at most. It is concluded that the biggest impact on year-on-year price growth in the last quarter of 2023 will still be the increase in food and electricity prices, but in terms of its impact, compared to previous quarters, it will not be much ahead of the price of tobacco, alcoholic beverages and fuel.

As for the price of oil, the RZS analysis confirmed that Brent crude oil prices on the world market are ahead of fuel prices in Serbia by about a month on average. After analyzing the excise calendar and comparing it with the price of fuel, it is noticeable that fuel prices mostly depend on the price of crude oil, and therefore their increase does not necessarily occur due to the increase in excise taxes. This means that a possible rise or fall in the price of Brent crude oil in the current month leads, on average, to a rise or fall in the price of fuel in the following month.

Therefore, if by the end of September 2023 (or even October) the price of Brent crude oil on the world market is in decline, the inflationary effects of the announced increase in excise duties on the retail price of diesel and gasoline in October and November could be absent.

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On the other hand, the analysis confirms that the increase in fuel prices in the same quarter leads to an increase in the producer prices of agricultural and fishery products, while the producer prices of agricultural and fishery products are ahead of food prices for one quarter as well. Any disparity in this perennial pattern most vividly illustrates the impact of trade margins in consumer price trends. This means that the possible inflationary effects of the increase in the price of fuel in the months of the fourth quarter of 2023 on the increase in the prices of food and beverages would be reflected only at the beginning of 2024.

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