Belarus Watch: Another Inflation Spike in September

As expected, inflation has started to rise again in Belarus. Inflation accelerated to 10.2% yoy. The main driver of the CPI growth was the food prices, which increased by 11.2% yoy. We project the CPI peaking at 11% in December 2021 and a decline in of inflation during 2022.

Price dynamics accelerate in September (% mom)
Belstat, RBI/Raiffeisen Research

According to official statistics, in September 2021 inflation started to grow and reached another four-year maximum of 10.2% yoy or 1.3% mom. The prices' growth occurred in all groups: food, nonfood, and services, but the main September price-push upward was the foodstuffs. Thus, if in July and August 2021 there was a month-to-month price reduction for foodstuffs, in September 2021 food prices rose by 2.1% against August 2021 and by 11.2% yoy. Nonfood prices also accelerated and added 1% to August or 10.3% yoy. Services increased by 8.5% yoy. Meanwhile, the core inflation remained at 9.9% yoy, while on a month-to-month basis it rose by 1.3% in September vs. August. According to the National Bank of Belarus, the largest price growth for regulated goods was traditionally medicines (+21.1%), fuel (+17.7%), and passenger transport (+15.8%) in September 2021.

Both internal and external factors put pressure on price growth in Belarus. On the one hand, lower-than-planned actual agricultural results and rising fuel prices pushed up food prices. On the other hand, increasing inflation on world markets, including Russia, the main trading partner, also pressured up prices in Belarus. The possible ongoing fuel price hikes amid climbing oil prices, as well as other seasonal factors, will continue to squeeze domestic prices, which may lead to an inflation ramp up to 11% by the end of the year. Reacting to the prices growth the National Bank of Belarus may raise the key rate to 10% by the end-2021.