Inflation in Europe is in sharp decline, so according to the flash estimate of Eurostat, it fell to 2.4 percent in November, due to a large drop in energy prices.
However, core inflation, i.e. the price index that excludes the prices of food, tobacco, alcoholic beverages and energy, although falling, is still well above the level targeted by the European Central Bank.
Core inflation fell to 3.6 percent in November, while the ECB’s goal is for inflation to reach two percent.
In Serbia, too, inflation is on a downward trajectory, but at a significantly higher level. The latest data from the Republic Institute of Statistics is for October, when inflation fell to 8.5 percent. Base inflation was 7.3 percent, and let’s remember that the National Bank targets inflation in the corridor of 1.5 to 4.5 percent.
According to Erste Group’s report, in most countries of Central and Eastern Europe, inflation can be expected to remain above the target levels of central banks next year. Despite this, some of them, like the Polish and Hungarian central banks, have already started to cut interest rates.
It is interesting to note that these two countries are among those with the highest inflation in Europe. Unfortunately, Serbia is also in this group.
At the end of this year, according to the IMF’s projections, excluding Turkey, the Czech Republic, Serbia and Hungary will have the highest annual inflation.
Namely, the IMF estimates that in December 2023, the Czech Republic will have an annual inflation rate of 8.3 percent, and Serbia and Hungary’s annual inflation will stand at 8.2 percent. When asked why Serbia has one of the highest inflation rates in Europe this year, the most common answer is energy prices.
Last year, electricity and gas prices in Serbia were capped, as were fuel prices, but this year, while the EU watched energy prices decrease compared to the previous year, in Serbia, the situation was the opposite, with prices of fuel, electricity and natural gas galloping.
The tide of price increases started in Serbia in 2021 and ending with 2023, based on IMF projections, cumulative inflation in Serbia amounted to 34.3 percent.
(Biznis i Finansije, 07.12.2023)
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