29 March 2024, Friday, 9:48
Support
the website
Sim Sim,
Charter 97!
Categories

Economist: They Wanted To Restrain Prices But Only Stimulated Their Growth

2
Economist: They Wanted To Restrain Prices But Only Stimulated Their Growth
LEU MARHOLIN

What to expect for Belarusians in connection with the “freezing” of prices for food and medicines?

Today, the government has introduced significant restrictions on price increases, in the restrictive list - 62 items for consumer goods, and 50 - for medicines. So, until the end of February, manufacturers, suppliers and trade were banned from raising prices, and from March 1 - no more than 0.2% per month. A similar solution was introduced in 2020, but it failed, and was quickly canceled.

What can Belarusians expect in connection with the new restrictions? Economist Leu Marholin commented on the situation for Charter97.org:

- Approximately the same as in the 2020 year - it will be canceled sooner or later, because the directive restriction of price growth, which does not take into account the economic situation, can lead to only one thing - the disappearance of goods from the shelves. Not a single seller, be it a private enterprise, be it a state one, will sell goods at a loss. When the state introduces additional VAT or increases it, it does not think that it will increase the rise in prices for goods. And when prices rise, the authorities try to limit it by directive methods.

Prime Minister Halouchanka and the people in the executive branch are very far from the economy, from understanding its laws, they, as in the army, believe that you can order prices to “stop”, and prices will stop immediately. In fact, it doesn't work that way.

- In many cases, after the administrative regulation of prices there comes a shortage of goods, and then prices jump even more. Can we say that by such decisions the regime creates big economic problems for the population?

- Of course, because the disappearance of goods is one side of the coin. In fact, it also happens that retailers take advantage of the opportunity to sell new items for which prices have not yet been set.

Accordingly, there is an opportunity to “inflate” prices, there is an opportunity to bypass this mechanism and, naturally, they use it. It turns out exactly the opposite: they wanted to limit prices, but in fact only stimulated their additional growth.

- Do Belarusians need to prepare for the crisis, as in 2011, when we saw empty shelves in stores, the depreciation of the ruble, and large-scale inflation?

- As for 2011, so far there are no prerequisites for such a situation, because for this, it is necessary for the National Bank to start printing money uncontrollably, as they say, “with a mad printer”.

This would lead to a sharp jump in demand for currency, followed by restrictions on the sale of currency or some kind of double rates. And when people do not have the opportunity to use currency as a means of accumulation, people rush for durable goods that they were going to buy or were not going to buy, but they can be stored at home, and later, if necessary, re-sold at new prices.

So far, this is not happening. I think that as long as Pavel Kallaur is the chairman of the National Bank, this will probably not happen, but we need to keep an eye on this, because the desire to dramatically increase directed lending to our state monopolies is very high, and is striving for constant growth. It is not excluded that the moment will come when the National Bank will not be able to sustain this pressure, and the machine will be turned on.

- If we consider the decision to regulate prices as a symptom, then what diagnosis can be made to the Belarusian economy? What perspectives does it have without the external credit support?

- The diagnosis of the Belarusian economy was made back in August last year, because the economy lives on constant investment. An economy without investment is like a modern Mercedes car without gasoline. An economy without investment cannot develop or even survive.

The investment climate suffered a severe blow last August. Accordingly, the economy, depending on further actions of the government, will either stagnate or shrink, or even collapse. Everything depends on the actions of the National Bank. If the authorities do not turn on the printing press, then we will see a gradual decline in the economy, and this is called a recession.

Write your comment 2

Follow Charter97.org social media accounts