Inflation Breaking Records

In Azerbaijan for the first quarter of this year, the inflation rate reached 13.2% compared with the same period last year. This is evidenced by the report on the consumer price index (CPI), released by the State Statistics Committee the other day. During this period, food products went up by 17%, non-food products - by 12.6%, and the cost of paid services rendered to the population increased by 8.6%.

As noted in the document, last March prices for consumer goods and service tariffs rose by 1.6% compared to February and by 2.3% - to January.

In particular, food prices for this period increased by 3.1%, prices for non-food products - by 0.6%, and the cost of paid services increased by 0.5%.

If we take the structural analysis of the consumer basket, the largest increase in prices was recorded for tobacco products - by 90%. Further down the descending line is tea, coffee and cocoa (+ 28.7%), oils and fats (+ 27.1%), mineral waters, soft drinks and juices (+ 20.6%), bread products and cereals (+ 17.6%), vodka and brandy (+ 17.3%), dairy products, cheese and eggs (+ 11.5%), and fish products (+ 10.6%).

As for non-food products, it is as follows: household appliances (+ 35.4%), small electrical appliances (+ 34.2%), drugs (+ 32.3%), calculators, personal computers, tablets, notebooks (+ 30, 3%) spare parts for cars (+ 31%), etc.

There are several factors that have spurred the inflation rate in the country. Firstly, during the reporting period, the national currency weakened, and in fact a significant part of our products are imports, so they have to pay more for them at the same prices in dollars. In addition, customs duties on imports of both food and non-food groups have also increased. However, prices for domestic food also went up. Producers explain this with high tariffs for electricity, raw materials and ingredients purchased abroad, as well as transportation costs.

One should also take into account the monetary policy of the CBA, which, in order to prevent a surge in inflation, is trying to reduce the manat in circulation. As you know, the inflation process largely depends on the tactics of the CBA. It refers to the processes of increasing or decreasing the money supply. Judging by the speed of inflation in the country, it is not yet necessary to talk about the effectiveness of the actions of the country's main financial institution.

However, the high level of inflation in Azerbaijan is to a certain extent due to corruption and monopoly. As the independent economist Azer Mehdiyev notes, there is a monopoly on the supply of certain groups of goods. Someone monopolizes imports of bananas or dried fruit, the other - mobile phones, computers, or drugs. They also determine the prices of these goods. Monopolists and oligarchs dictate their prices in the sphere of construction, services, processing, industry, etc.

“Two-digit inflation for the first quarter of the year suggests that the national economy is in a state of deep stagnation. The crisis has completely enveloped the banking system and the real economy, and they cannot get out of this crisis,” Mehdiyev said.

Particularly it is necessary to note the role of so-called administrative corruption. These are customs officers controlling the import and export of goods, tax authorities and other services collecting fees and regulating small and medium-sized businesses, which in turn shifts corruption costs to the consumers.

Recall that in the budget for 2017, inflation is projected at 7.3%. The current dynamics of prices in the consumer market shows that this milestone has already been overcome. Analysts admit that the chances of inflation to keep within the annual forecast of 7.3% are still preserved, but this directly depends on the agrarian sector, competent actions of the CBA and antitrust struggle of the state. -0--