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Iryna Akimova: The Tymoshenko government is unable to manage price growth
08.04.2008, 17:59
"The Tymoshenko government continues to set new inflation records", Minister of Economy of the Opposition government, the Party of Regions People's Deputy Iryna Akimova noted in her comment to the Party of Regions press-service. "Statistical indices show it explicitly. Within March of 2008 consumer prices in Ukraine grew by 3.8% as compared to February. It is the highest monthly inflation rate since January of 2000". She also informed:
- Since the beginning of this year inflation has amounted to 9.7%. Thus, price advance in the first quarter of 2008 exceeded the government's annual prognosis of 9.6%.
Moreover, in March of 2008 the 12-month inflation accelerated to 26.2% as compared to 16.6% early in the year.
High consumer inflation is primarily caused by galloping rise in food prices. Within the first three months of 2008 food went up by 14.9%. In March food grew in price by next 5.8 pct.
And foremost inflation hits the poorest layers of population, that have relatively higher share of food expenses.
From a food basket the most considerable rise in prices occurred to meat products – by 8.9 pct per month, that made up one third of the whole inflation in March. Bread, sunflower-seed oil and fruits are another items of the largest contribution to inflation.
Significant acceleration of price increase in March, though has surpassed expectations, is generally natural. Since the beginning of 2008 an average monthly inflation has exceeded 3% (whilst it amounted to 2.4% according to the last quarter of 2007).
It is utterly difficult to hamper such inflation under conditions of increasing price expectations of the people. It requires professional, systematic, coordinated and rigid actions of the government and the National Bank. The Tymoshenko government lacks such actions indeed.
As all of us remember, one of the government's main program promises in a sphere of economic policy was to ensure low prices. The Prime Minister gave public oaths more than once, that Ukraine will enjoy inflation decrease under her guidance since February.
Let us be realistic. The launch of anti-inflation measures the present government has already lost.
Earning short-term political dividends, the Tymoshenko government further plunges Ukraine into an inflation spiral.
The government delays to adopt an anti-inflation program, the status of which has not been defined still.
Given spurge in inflation, the government boosts additional inflationary expectations. Large-scale social projects are initiated, which the current authorities fail to accomplish: full reimbursement of deposits in two years, considerably cheaper mortgage, etc.
The government's actual initiatives are focused on administrative curb of price growth, that might produce the effect for upcoming two-three months, but will worsen inflation dynamics for the second half of 2008.
Alterations were not made to the 2008 budget, that would show the government's adherence to toughen fiscal policy and decrease budget deficit to 1-2%.
Taking into account the above mentioned tendencies – unless coordination of the authorities' anti-inflation moves will be improved, what is admitted in the NBU and the Presidential Secretariat, then the optimistic inflation rate as for the end of 2008 will remain at a level of 2007 (16-17%) at best.
In case of a pessimistic scenario inflation could exceed 20% by the year results.
The majority of international organizations has already worsened inflation forecasts significantly: S&P – to 20%, the World Bank – to 17.2%, the IMF – to 17% (December/by December).
Thus, the first results of the Tymoshenko government performance let assert that there are grave risks that inflation will accelerate. The Cabinet of Ministers continues to plunge Ukraine in the inflation spiral "social payments/wages – prices", hyping price expectations and focusing on short-term administrative instruments of impeding price growth on competitive food markets. | |
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