The VAT increase should have no effect on inflation

The impact of the VAT increase on inflation has been exhausted, and the pace of price growth returned to normal.

This is stated in the review of economic development “Picture of inflation. March 2019”.

According to Rosstat, inflation in February was 0.4% on a monthly basis, the annual rate of price growth reached 5.2%. The MAYOR estimates the total contribution of the VAT increase in annual inflation at 0.8-0.9 p. p.

“In February 2019 the growth rate of prices back to the levels of last year, which indicates the exhaustion of the effect on prices from higher VAT,” says the review.

Especially noticeable slowdown in prices was in the segment of durable goods (cars, communications, teleradiocomany). The decline in gasoline prices by 0.18%, with a positive impact on nonfood inflation.

“In February slowed down growth in food prices excluding fruits and vegetables – up to 0.33% from 0.57% in January, due to the correction in prices for poultry meat, sugar and eggs after their accelerated growth in the fourth quarter of last year. However, the significant contribution to inflation in February made a seasonal rise in fruit and vegetable production”, – the document says.

At the end of March in annual terms, inflation is expected at level of 5,2-5,4%. But by the end of the year the MAYOR expects the slowdown decreased to 4.3%. The Central Bank continues to expect inflation peak in March-April and growth in annual expression up to 6%, but predicts inflation at the level of 5-5,5% for the year.

© 2019, paradox. All rights reserved.