The Belarusians will see the further growth of prices of goods and services.
Vadzim Iosub, a financial analyst of Alpari official partner in Minsk, talks with Zavtra Tvoey Strany why prices in Belarus are growing rapidly.
– The inflation rate is expected to be 11% this year, according to the government's forecasts. It has reached almost 9% in five months. Why do expectations of the Council of Ministers fail?
– No one believed in the forecasts from the very beginning. A softer monetary policy, a decline in the bank rate and thus in loan interests have made the situation even worse. But it seems that no one hurries to improve it. Decisions have been taken not to restrict the growth of lending. The growth was supposed to be not more than 0.7% a month. As a result, the wage increase again exceeds the growth of labour productivity. “Empty” money only make prices grow further.
Another thing that stimulates the inflation is the ineffective economy. It is loss-making. It destroys the added value instead of creating it.
– How can the inflation rate be decreased?
– We need to solve two problems: a monetary one and a structural one. From the monetary point of view, it's necessary to stop the gradual decrease in the bank rate and, perhaps, to raise it. In any case, economic problems cannot be solved without structural reforms. At best, it will take several years if we have the political will.
However, the authorities are trying to solve all current problems with the help of foreign loans.
– How long can the country live on loans?
– As long as it has them. Russian loans look more like the pay for political loyalty. It's hard to predict how long Russia will support Belarus as its political ally.
– In your opinion, what inflation rate will be at the end of the year?
– If the rather strict policy we saw at the beginning of the year had been continued, the inflation rate wouldn't exceed 15%. But the government intends to further decrease the bank rate, so it's highly probable that the inflation rate will be 20% and even higher.
According to the press service of the National Statistics Committee, food prices rose 3.5% in May in comparison with April, and rose 12% in comparison with December 2013. Prices of services increased 2% in May in comparison with April and 14% in comparison with the beginning of the year. The inflation rate is 19% in comparison with May 2013.