Serbia, When will the drop in inflation be reflected in prices?, News
Economists note that prices are always inelastic when they go down, i.e. they change more slowly, while everyone is quick when they rise.
“I don’t believe that inflation is falling and that by the end of the year it will be half as low as it is now.” It will continue to grow. Do you know that the prices of electricity and gas have risen again and do you know how much more this will increase the prices, a regular reader of our newspaper contacted us the other day with this comment.
Statistical data show that inflation is falling, in April it was 15.1 percent compared to March’s 16.2 percent. And everyone now asks what I got out of it. And will prices go into reverse?
Unfortunately, the citizens do not yet have any benefit from the drop in inflation for the simple reason that nothing becomes cheaper. When it is said that inflation is slowing down, it only means that the rate of price increase is lower, but that it still exists. Those who are a little older and with a good memory of the long period of inflation in our history state that prices never went back down and that there was no cheapening.
Economists note that prices are always inelastic when they go down, i.e. they decrease more slowly, while everyone is quick when they rise. And at the recent presentation of the inflation report at the National Bank of Serbia (NBS), there was talk about it. Savo Jakovljević, general director of the Sector for Economic Research and Statistics at the NBS, says that we should not yet expect prices to fall compared to the previous month.
“When we talk about the annual inflation rate, we compare the prices in one month of this year with the same month in 2022. When we state that we expect inflation to decrease year-on-year, it means that there will be some price growth, but that this rate will be smaller and smaller.” For example, if the price of something is increased by one percent on a monthly basis, we predict that it will be increased by 0.5 percent the following month. As the period when the prices were the highest comes out of the calculation for one year, inflation will decrease. In the case of food, if the agricultural season is successful, those prices could start to decline on a monthly basis. For now, we say that the price increase will be lower”, said Jakovljević. He added that, since the beginning of the year, food prices in Europe have risen by 4.5 to 7 percent, which means that food prices are rising everywhere.
Milan Trajković, Deputy General Director of the Sector for Economic Research and Statistics, notes that if the agricultural season is average, it can already be seen in the prices of fruits and vegetables in July and August.
“From August and September, food prices will depend on the crop of soybeans, sunflowers, and corn. For example, three kilograms of sunflowers are needed for a liter of oil, plus 10 or 20 dinars. It does not matter whether the sunflower will cost 60, 50 or 40 dinars per kilogram. If the year is average, a faster reduction in food prices is possible. Drought can also happen.
We had two consecutive dry years in 2021 and 2022, which has never happened in Serbia since comparable data have been available. This had a huge impact on food prices. The problem is that there was also a drought in the surrounding countries. The price of wheat, corn, soybeans, and sunflowers cannot differ much on the stock exchange in Novi Sad from the stock exchanges on the Black Sea or Paris. Those prices are transferred immediately”, said Trajković.
Vice-governor Željko Jović also explains that it is possible that people’s individual or subjective feeling about inflation, because they buy some products, is different.
“In the April reduction of inflation from 1.1 percent, 0.7 percentage points was the reduction of food prices, and it takes a significant part in household budgets.” In the following period, we expect a decrease of two percentage points. And we have shown that we take care of those who repay loans by keeping the interest rate at six percent,” said Jović.
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