Prices forecasts of experts for the next year are not encouraging. Most likely, the republic will face a rise in prices, and for almost all goods. The reasons are the country’s dependence on imports and the possible increase in fuel prices.
Prices will rise after the economy
The Eurasian Development Bank (EDB) noted that until the end of 2018 inflationary background remained weak in the context of low prices on world food markets and the effect of strengthening som to the U.S. dollar in the first half of 2018.
At the beginning of 2019, inflation may accelerate due to an increase in excise taxes on tobacco products, and in the medium term, the expected recovery in food prices will complement the growth of energy sources’ prices.
In 2019, inflation will rise to 5-7 percent amid strengthening of global prices for food and energy sources.
Aigul Berdigulova, Analyst of the Economic Analysis Department at the Eurasian Development Bank
The National Bank of Kyrgyzstan has a similar point of view. It noted that, taking into account assessments of the development of the external environment and internal conditions, inflation in Kyrgyzstan in the medium term will remain within 5-7 percent.
In the absence of external and internal shocks, a gradual increase in economic activity in the country and the region will determine the entry of inflation into the target corridor by mid-2019.
In 2019, the average inflation rate in Kyrgyzstan will be about 5.5 percent.
«In the middle of 2019, the downward trend of inflation is expected to turn against the background of the recovery in prices on world commodity markets. In the medium term, prices will show growth and will strive for target inflation values of 5-7 percent,» the National Bank of the Kyrgyz Republic predicts.
U.S. dollar, fuel and lubricants are to blame
Gulnara Uskenbaeva, President of the Suppliers Association, noted that there would be small price fluctuations associated with the dollar exchange rate in 2019. This is due primarily to the great dependence of the republic on imported goods.
Whatever may be said about the Eurasian Economic Union, settlements in rubles and tenge, but there is still a peg to the dollar. The Russians and the Kazakhs are revising prices depending on the U.S. dollar.
Gulnara Uskenbaeva
In addition, one should pay attention to the cost of fuel. After all, most of the goods, including food, are carried by road. If transportation becomes more expensive, then prices will rise. Based on these factors, the Suppliers Association predicts a rise in prices of all types of goods.
Optimistic expectations are such that the prices will rise from 5 to 15 percent in 2019.
«But it is worth noting that prices rise by about 5-10 percent due to currency fluctuations from year to year. Although the National Statistical Committee speaks of deflation, we see the opposite,» Gulnara Uskenbaeva summed up.
Alcohol and sugar will rise in price
According to economists, the price of alcohol and tobacco products will rise in 2019. This is directly related to the increase in excise taxes on them.
According to the government decree, the minimum price for a pack of cigarettes will increase by 10 soms — up to 60 soms — from January 1, 2019.
As for the prices for alcohol, they steadily grew throughout 2018. Due to the fact that Kyrgyzstan is gradually aligning the rates of excise tax on alcohol with the countries of the EEU, experts predict that in 2019 the rise in the price of alcohol will continue.
In addition, experts noted that the situation in the basic agricultural markets will affect the retail prices of products. It concerns sugar first of all. The sugar beet harvest in 2018 was 15 percent lower than in 2017. This has already led to an increase in wholesale prices for sugar.
In Kyrgyzstan, despite the stable operation of two sugar factories and the minimum import of sugar, its price did not fall below 42-44 soms. This is 5 soms more than in 2017.
World sugar prices are low, but there has been a rise, RBC reported. Prices are rising amid expectations of a deficit global sugar balance after two seasons of surplus. According to preliminary estimates, the deficit in 2019-2020 will amount to 7.2 million tons with consumption of 189.6 million tons.
Experts expect sugar prices to rise in the spring. However, too serious growth is not predicted — in the range of 5-10 percent.
Fuel prices may rise
Fears of suppliers of rising fuel prices are justified. Kyrgyzstan buys fuels and lubricants in Russia. Despite the fact that the supply is duty free, the fuel only became more expensive in 2018. Kyrgyzstan buys it wholesale at Russian factories, so prices in the republic directly depend on the situation in the Russian Federation.
From January 1, 2019, Russia will increase the excise tax on fuel. According to the Accounts Chamber of the Russian Federation, its one and a half times increase can again lead to a sharp increase in gasoline prices and require additional compensatory and restraining measures.
The Federal Antimonopoly Service of Russia believes that gasoline in 2019 will rise in price along with inflation, which is predicted at 4.3 percent.
But the President of the Russian Fuel Union Evgeny Arkusha suggests that gasoline prices in Russia will rise by 10 percent in 2019.
In any case, the rise in price of wholesale batches of petroleum products cannot be avoided. This means that this year Kyrgyzstan will face with a rise in prices for fuel and lubricants. In part, it can be neutralized by the approval of the agreement with Kazakhstan on the supply of gasoline.
But the republic will continue to import diesel fuel from Russia. After all, it rose in price most of all in 2018.
According to the National Statistical Committee of Kyrgyzstan, for the first 9 months of 2018, fuel in Kyrgyzstan has risen in price by an average of 9.2 percent. And the price of diesel fuel grew by a record 14.5 percent.
