Br Devaluation Will Result in Q1 Inflation Rate 40% Higher
OREANDA-NEWS. On 11 January 2008 was announced, that a possible result of the 20% devaluation of the Belarusian ruble (Br) is an inflation rate 40% higher than the original forecast for the first quarter of 2009 – 3.5%-4.2% instead of 2.5%-3.5%, under best-case and baseline scenarios, a market expert told.
In 2009, consumer prices may increase 11.4% instead of 9%-11%, he said.
The key reasons behind the devaluation were the necessity to meet IMF lending conditions and mistakes of soft monetary policies throughout 2008.
“Huge injections in the real sector aimed to meet investment targets of the state did not come unnoticed. Many experts believe, though, that additional loans helped keep economic growth,” the source said.
Asked about the benefits the devaluation offers exporters, the expert noted that import costs would be growing. “Imports account for 43% of costs now, and the 20% rise in prices will contribute. The increase will not be proportionate, though, because prices of raw materials are falling,” he added.
Importers of consumer goods will raise prices on the basis of solvent demand. Prices will get stable in the middle of the year, the expert said, referring to the time lag.
“Officially, exports are falling, and so are currency proceeds. Imports are growing slower, because economic entities are short of resources,” the expert said.
Asked how much the Belarusian authorities will have to borrow to keep the exchange rate change within the 5% limit, the expert said everything depended on fiscal policies. “If the government manages to take a set of measures to restrain domestic demand, the situation on the money-market will remain manageable,” he said.