Competition and revenue able to balance the situation

World news agencies have recently been reporting rising prices for everything from food and fuel to transport and housing, utility services, medicine, education and leisure. What’s going on in the world and what can we expect from the future?

By Mikhail Overianov

The World Bank has announced that a food crisis has begun. Its President, Robert B. Zoellick, notes that prices for food products have already reached a dangerous level, with further growth forecast. Last year, food prices rose by 29 percent on average, resulting in 44m people finding themselves below the poverty line.

To feed their populations, Belarus’ neighbours are selling grain from their accumulated reserves. Sergey Trigubenko, Ukraine’s Deputy Minister for Agrarian Policy and Food, notes that products unsubsidised by the state may rise in price by 10 percent.

Our country has also seen food prices rise; in March, meat, milk, kefir, sour cream and cottage cheese rose in price, although the increase has been incremental. It reflects the appreciation of meat and milk, while bringing prices for dairy and meat products in line with those in neighbouring regions.

Experts view the move as positive. “We can remember the 1980-1990s, when almost everything was ‘swept away’ from Belarusian counters,” asserts Georgy Grits, Professor at the Belarusian State University’s Institute for Lifelong Education. “As a result, Belarusian consumers lost out. The current price growth is objective and enables us to reduce price competition within our country’s open economy, taking into account our integration aspirations. Alongside the evident advantages, the simplification of customs and visa procedures does have another side.”

Factors influencing price growth worldwide are rising in number. Riot-hit Libya has reduced oil extraction by over 3-fold — down by as much as 500,000 barrels per day. One of the largest oil ports and two oil refineries are closed; they account for 88 percent of the country’s oil refinery. Before the civil war, Libya extracted up to 1.69m barrels of oil daily.

“As a result, oil prices will continue to grow, alongside those for industrial and agricultural goods,” forecasts Alexey Danilchenko, the Head of the Belarusian State University’s Chair for International Economic Relations. “Under these conditions, we have only one way out: to reduce costs while enhancing labour productivity.”

“If the Customs Union operates at full capacity, the competitiveness of our produce and population incomes will rise, so we’ll avoid reduced standards of living,” explains Mr. Grits. He is keen to accent the prospects of the Customs Union. According to Dominique Strauss-Kahn, who heads the IMF, sustained growth of oil prices, caused by turmoil in the Middle East and North Africa, threatens the world economy. Meanwhile, this year, the Russian economy could rise 7.4 percent. “This is a reaction to the aggressive forecast relating to oil prices,” explains Dmitry Polevoi, an expert with ING Bank for Russia and Kazakhstan. Although most analysts agree that GDP growth at the expense of oil and gas revenue is no reason for pride, the Customs Union could use this opportunity to its advantage.

The Belarusian state continues to control prices for socially important goods and services while salaries are raised from time to time. Mr. Grits notes that such steps compensate for rising world prices. He adds, “Our Government aims to maintain the level of citizens’ welfare, preventing a sharp drop in purchasing power. I believe that, in the first six months of this year, price jumps connected with objective world processes and population incomes will find a balance.”

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