Economists see triple-digit Serbian inflation

BELGRADE, Jul 29, 2000 -- (Reuters) Inflation in Serbia has approached 100 percent annually and will worsen in the coming months despite government statements that the situation is under control, economists said on Friday.

According to official figures prices in June were 66.2 percent higher than a year ago and 4.2 higher than May.

But the independent Economics Institute said at a news conference that the year-on-year inflation rate in June was 99.8 percent and the month-on-month rate 6.2 percent.

"The price hikes are not being registered realistically. Administrative controls have created deep price disparities but have not eliminated inflation," Nebojsa Savic of the Economics Institute said.

He said 61 percent of all goods and services in Serbia were under government control.

"If the government decides now to free the prices, the elimination of existing price disparities would result in a one-off 80 percent monthly inflation," Savic said.

He said the government was pursuing a "populist economic policy" ahead of elections set for September 24, promising cheap bread, milk and cooking oil. Publication of low inflation figures was designed to prevent public discontent, he charged.

"It is certainly not an unimportant factor for them. They are hiding real inflation and consumer basket figures, because they are the two things people understand," Savic said. Savic said the 2000 inflation would stand at 125 percent if the official statistics took into account price adjustments.

A survey among some 200 Serbian companies conducted by the institute showed that 80 percent of them expected production costs and input prices to grow over the next three months.

High inflationary expectations, massive growth in public revenues and a sharp increase in foreign trade deficit all pointed to a deteriorating outlook towards the end of 2000.

Miroljub Labus, of the G17 group of independent economists, said inflation had already hit 100 percent and expected it to grow, with average monthly rates rising over 5.0 percent.

He told Reuters the immediate economic future directly depended on what kind of economic policy the government will pursue around the September elections.

"The government traditionally uses the election period to issue money and the expansion always shows after the polls," Labus said.

The central bank last issued M1 money supply figures in March. "The question is why they keep hiding it," Savic said.

The central bank governor said in July M1 was around YUN 18.0 billion. Savic saw it closer to 19.0 billion, while Labus estimated it already at 20.0 billion.

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