Belarus Watch: Inflation on the rise again

The influence of key deflationary factors decreased and October 2023 inflation rose to 3.7% yoy from 2% amid delayed BYN devaluation effect and seasonal factors among others. Still, due to large decline in previous months, we lowered our December 2023 inflation forecast.

After historical lows, prices went up
Source: National Bank of Belarus, Belstat, RBI/Raiffeisen Research

In October 2023 inflation amounted to 3.7% yoy vs. 2% yoy in September. The main driver of CPI growth was services where inflation equaled 7.9% yoy. The seasonal factor affected the growth in the foodstuffs cost which increased by 4.3% yoy. At the same time, non-food products are cheaper by 0.3% yoy.

Monthly inflation equaled 0.6% mom. At the same time, the food and non-food prices rose by 1.2% mom and by 0.4% mom respectively, while services costs declined by 0.1% mom in October 2023.

Core inflation resumed its upward trend and reached 1.5% yoy in October 2023 vs. September 0.2% yoy deflation. State regulated prices and tariffs gained 7.7% yoy in October 2023 against 7.1% yoy in September 2023.

Resumption of inflation growth was facilitated by the delayed effect of BYN devaluation against USD and CNY, rising consumer and investment imports (especially from the Asian region), seasonality and the start of the heating period, as well as the waning impact of the 2022 comparison base. We anticipate the negative influence of the above-mentioned factors on CPI to persist until the end of the year. Still, due to the larger than we assumed decline in CPI in the previous months we adjusted our forecast downwards and expect 7.0% yoy CPI in December 2023 vs 8.5% forecasted previously.

At the same time, as for the National Bank of Belarus rate policy, we assume that the regulator will maintain its cautious approach in cutting the key rate and keep it at 9-9.5% until the end of 2023.

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Dorota Strauch is leading economic research on Poland from the RBI Branch located in Warsaw. She began working in Polish RBI network bank in 2010. In 2017 she became the Head of Polish Research team. Having a master’s degree in Financial Markets and Banking she deepened her knowledge by becoming the CFA charterholder in 2016. In the following years she has been focusing on improving data analysis skills with the use of Python programming language. Apart from current economic developments in Poland and the CEE region she is particularly interested in the impact of new technologies on the economy, politics and society.