VIDEO INTERVIEW| Abil Bausch: Unfrozen prices will not unfreeze inflation, panic can make prices rise

Abil Baush/photo Slobodan Pechat/Slobodan Djuric

The analysis of the data shows that 46 percent of the citizens have a salary from the minimum 20.175 denars to 29.000 denars. It is absurd that there is unemployment at 12,8 percent and people living in absolute poverty and yet no workers can be found

There are no indicators that indicate that with the unfreezing of the prices of basic food products from February 1, inflation will rise, but there is a danger of unjustified panic that could make certain products more expensive, according to economic analyst Abil Bausch, who was a guest on the morning show of "Sloboden Pechat".

– The latest data show a monthly decrease in the cost of living by 0,3 percent. But the psychological moment can do what we have already seen, panic among the population, purchase of certain products and pressure on the supply. In such a case, prices may increase for certain products. Certain companies can use this situation speculatively - says Bausch.

He says that he expected this measure to be abolished earlier, and according to him, it should not have been implemented at all, but a policy of better import of goods was needed, which would bring price competitiveness, but also better quality of food.

– The state should be a good arbiter. It's like we spoiled our companies during the pandemic and the crisis, they can do whatever they want and influence the creation of some measure. If the import of certain substitutes were allowed in the country with a price component that would be competitive, then greater competition would be created on the market, and this would affect the prices in the interest of the citizens. With the limited prices, double damage was done, that there was not enough competitiveness in the country, as well as damage in terms of the quality of the products because they did not have substitutes - says Bausch.

 

Analyzing the last basket for February for a four-member family published by the Union of Trade Unions, which amounts to 57.476 denars, Bausch notes that food and drinks are 21.219, which is almost identical to the minimum wage.

- The analysis of the data shows that 46 percent of the citizens have a salary from the minimum 20.175 denars to 29.000 denars. This means that in a vital family of four, two salaries can exceed the basket of 57.476 denars. But here we have a high percentage of cases where both spouses are not employed. In these conditions, there must be serious investments from the central government and we must focus on certain sectors, on regional cooperation, on infrastructure projects, on the human capital that escapes from the state every day - says Bausch.

He emphasizes that great opportunities also lie in the suppression of the gray economy.

- I have to emphasize one very important fact, which is the gray economy, which is somewhere from 32 to 39 percent of GDP, which is somewhere around 4,28 billion euros per year. If you reduce the gray economy, according to some of my estimates, we will have a GDP growth of 10 percent, because at the same time you will have taxes, employment - says Bausch.

He says we have an absurd situation – we still have high unemployment at 12,8 percent, with youth unemployment particularly high at around 38 percent, and we have families living in absolute poverty.

- At the same time, we have advertisements in all activities where workers cannot be found. We need to find ways to bring some of those working in the gray economy into the formal economy. In practice, someone from absolute poverty should be taken, trained to be part of the market. And that's how the standard rises - the economic analyst points out.

Regarding future inflation expectations, Bausch explains that it is very thankless for an economist to make an estimate.

- It is expected that 2024 will be the year of economic recovery. But we also have to take into account that all countries are in election years and we do not know what measures the leading economies will take. I was also worried by the statements from the European Central Bank and the Federal Bank of the USA, which do not give any positive forecasts for the economy, but left some "status quo" situation, which is unfavorable for the economy, speculations appear, the psychological moment. The estimates of the National Bank are that we will finish the year with 3,5 percent inflation, if we finish like that, or with 4 percent, it will be good. I'm afraid that it's an election year, so that we don't get caught up in spending, and that's more money in circulation that could cause a problem with inflation - concludes Bausch.

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