Annual inflation rate for Belarus projected at 5-6% in 2020

“The accelerated price rise in Q1 will have an impact on the annual inflation rate throughout the entire year of 2020. As a result, the inflation rate is projected to be within 5-6% at the year-end. According to estimates, at the start of the next year, the annual growth in prices will stay within 5%,” Pavel Kallaur said.

At the meeting to discuss the monetary policy on 13 May the Board of the National Bank decided to reduce the refinancing rate from 8.75% to 8% on 20 May. The same will apply to the bank's rates on banks' liquidity operations.

According to the head of the National Bank, the decision is based on the updated economic and monetary development forecast through the end of 2020 and for 2021. It takes into account the significant changes which have recently taken place worldwide and in Belarus.

According to these estimates, the current acceleration of inflation is temporary and the disinflationary influence of the aggregate demand will increase in the coming months, which will lead to a slowdown in the growth of prices to the rate of late 2019. “Such a change in the balance between short-term proinflationary and continuous disinflationary factors provides an opportunity to keep easing the monetary policy without threatening price stability in the medium-term period,” Pavel Kallaur explained.

The National Bank attributes the acceleration of inflation in Q1 to the adverse effects of external factors. Thus, amid declining oil prices and weakening Russian ruble, there was a nominal weakening of the national currency. In the context of the pandemic and quarantine measures abroad, the demand for long-shelf food and essential goods has increased in the domestic market of Belarus. Economic sentiments have worsened and inflation expectations have risen.

“As we have already said we see the acceleration of inflation early this year as temporary. In the second quarter of 2020, the impact of these factors will remain in place. However, in the second half of this year, the quarterly price growth rate will slow down and return to the level of the end of last year,” Pavel Kallaur said.