The increase in inflation in October to 3.1% from September’s 2.6% is primarily due to higher food prices. Further growth in the prices of goods and services should be brought about by consolidation measures next year. Inflation should thus reach about five percent. Analysts agreed on this on Friday in response to data published by the Slovak Statistical Office.
“The most significant driver of the year-on-year inflation rate was the higher prices of food and non-alcoholic beverages, which increased by five percent year-on-year. Behind the increase in food prices, we see mainly the consequences of developments in global markets. Undoubtedly, prices will also be pressured by domestic events, for example problems in Slovak poultry farms due to avian flu,” stated Slovak Savings Bank analyst Marián Kočiš.
According to him, a significant increase in the inflation rate is expected next year. The reason is the expiration of energy subsidies, as well as the expected increase in value added tax (VAT) and other taxes as part of the government’s consolidation measures. According to Kočiš, the average rate of inflation could stabilize slightly below five percent in the following year.
“In October, it was the fastest month-on-month increase in food prices since the beginning of last year,” he stated UniCredit Bank analyst Ľubomír Koršňák with the fact that the acceleration was also supported by regulated prices, which increased by an average of 0.3% compared to September. He pointed out that the current inflationary pressures will once again have a more noticeable impact on vulnerable groups of households.
In addition, according to him, the announced adjustments in VAT may appear in some prices slightly ahead of time. “Especially for items with an expected decrease in the rate, we could see a slight increase in price before the end of the year, which would create space for merchants to ‘reflect’ the lower VAT rate into prices in the New Year,” he pointed out. According to him, inflation should reach about five percent at the beginning of next year.
He also expects an increase in the prices of goods and services analyst of the National Bank of Slovakia Branislav Karmažin. “Even taking into account the historical development, the prices of fruits, vegetables, oils and fats, flour products, confectionery grew very quickly within food. At the same time, the current production prices of food for the domestic market do not create significant space for such a dynamic increase in consumer prices.” concluded.
