The ministry expects average inflation of 10.8 percent this year, improving the estimate by 0.1 percentage point compared to August. But the office worsened the price development outlook for next year, when it now expects inflation to be 3.3 percent instead of 2.8 percent according to the August forecast.
According to economists and Stanjura himself, the January revaluation is a big unknown. This, in addition to the increase in energy prices due to the growth of the regulated component, will also be influenced by changes in value added tax rates.
Inflation rose to 8.5 percent, to be followed by a sharp decline
According to Stanjura, the high profitability of companies contributed to this year’s high inflation to a large extent, which is confirmed by better-than-expected corporate income tax collections. In addition to increased inflationary costs, the companies reflected higher margins in their sales prices, he said. Director of the Department of Economic Policy of the Ministry of Finance, David Prušvic, added that in 2021, the profitability of companies increased by eight percent, in 2022 by 12 percent, so the pace was faster than that of salary growth.
Households dampened consumption
According to Stanjura, although the economic recovery will come in the fourth quarter after the lackluster performances of the previous quarters, the country will still not achieve full-year growth. “The reason is clear, also due to high inflation, households have drastically slowed down their consumption,” said the head of the state treasury. According to him, the decline in household consumption is compensated to a certain extent by exports, investments and consumption by government institutions.
Next year, according to the ministry, economic recovery will come when the GDP will increase by 1.9 percent. At the same time, it is primarily driven by revived household consumption as a result of lower inflation and, as a result, rising real wages. However, economic growth will be weaker than the ministry predicted in the August prediction, when the GDP increase was estimated at 2.3 percent.
The unemployment rate will remain low, according to the Ministry of Finance’s forecast. This year it will reach 2.7 percent, next year it will rise to 2.8 percent. “Thanks to the situation in the labor market, there will continue to be pressure on wages, especially in the private sector,” Stanjura said. According to him, thanks to this, real wages will return to growth after two years.