Tajikistan: Inflation reaches a bottom in June, set to inch up over 2H23

CAUCASUS / CENTRAL ASIA - In Brief 31 Jul 2023 by Ivan Tchakarov

---

Headline inflation rose by 2.4 percent YoY in June, on par with the May print, but core inflation increased slightly to 2.2 percent YoY from 2.1 percent YoY in May. The National Bank of Tajikistan reported the Jun breakdown of inflation, as usual with significant delay. Headline inflation expanded by 2.4 percent YoY matching the May print, but it has been gradually declining since the peak of 10.1 percent YoY registered in early 2021 (Graphs 1 and 2). This has been chiefly driven by the moderation of food inflation given that food accounts for 58 percent of the CPI basket, the highest in our sample of CCA economies. At the same time nonfood and services inflation have started to inch up, while core inflation, which had fallen from 2.9 percent YoY in Jan/Feb 2023 to 2.1 percent YoY in May, now rose to 2.2 percent YoY. Graph 1 Inflation has bottomed Source: National Bank of Tajikistan, Author’s calculations. Graph 2 There is a rotation of price pressures away from food into nonfood and services Source: National Bank of Tajikistan, Author’s calculations. Inflation has now reached a bottom and will see increasing tailwinds as the year progresses. The announced salary hikes for some civil servants from March to July, the expected raise in pensions in July, and the upward adjustment of electricity tariffs in Nov 2023 will now engineer a shift in the inflation path. Moreover, economic momentum has been very strong so far in the year, with Jan to May GDP growth running at 8.2 percent YoY, i.e., on par with the 2022 pace of expansion. We have argued that domestic demand is driving growth, with particularly strong performance from industrial production and agriculture. As a resu...