TOPIC OF THE WEEK: Inflation to remain subdued in 2024
Inflation fell in all CCA countries in 2023 despite above-average economic growth. Average price growth almost halved, from 10.0 percent in 2022 to 5.4 percent in 2023. The key reason for this downward-sloping trajectory was the sharp decline in food prices, which account for a share of the consumer basket that tends to be high even for the standards of emerging and developing economies. While food inflation had started to moderate in 2022, nonfood and services inflation also contributed to the broader price growth decline in 2023.
This favorable development has now come to an end as we anticipate a gradual acceleration of inflation over the course of 2024, albeit from low levels. We see average inflation increasing almost everywhere, including Armenia, Georgia, and Tajikistan. On the other hand, Azerbaijan will face much lower average inflation, although this will be chiefly driven by the very high base in early 2023, while we forecast inflation in Uzbekistan to remain broadly unchanged. Quantitatively, we, however, estimate that inflation in 2024 will average 5.1 percent, i.e., that it will continue to remain subdued over the course of the year. Moreover, we see the CPI in all countries, except for Uzbekistan, remaining around or below individual inflation targets.
The forces that would keep inflation in check, including less potent growth dynamics, deflationary PPI impulses from China, and tight monetary in the region will, in our view, still outweigh the more robust price pressures deriving from Russia and the expectations of modestly weaker currencies. This baseline scenario may be violated in the case of a more aggressive pickup in energy prices given the oil-importing nature of the majority of CCA economies and fresh geopolitical crises.
Now read on...
Register to sample a report