Analysts: Inflation Should Reach about 5 percent Next Year

Bratislava, November 15 (TASR) - Higher food prices are mainly responsible for the rise in inflation from 2.6 percent in September to 3.1 percent in October, while further growth in the prices of goods and services will be brought about by consolidation measures next year, analysts concurred on Friday in response to data released by the Statistics Office, adding that inflation is thus expected to reach around 5 percent. "The most significant driving force behind the year-on-year inflation rate was higher prices of food and non-alcoholic beverages, which rose by 5 percent year-on-year. We see the increase in food prices mainly as a result of developments on global markets. Prices will undoubtedly also come under pressure from domestic events, such as problems at Slovak poultry farms due to bird flu," said Slovenska sporitelna bank analyst Marian Kocis. According to him, inflation is expected to rise significantly next year. This is due to the end of energy subsidies as well as the expected increase in value-added tax (VAT) and other taxes as part of the government's consolidation measures. The average inflation rate could reach slightly below 5 percent next year, said Kocis. "In October we saw the fastest month-on-month increase in food prices since the beginning of last year," said UniCredit Bank analyst Lubomir Korsnak, noting that the acceleration was partly supported by regulated prices, which increased by an average of 0.3 percent when compared to September. He drew attention to the fact that the current inflationary pressures will again have a more noticeable impact on vulnerable household groups. Moreover, the announced VAT adjustments may appear in some prices slightly in advance, he warned. "Especially for items with an expected rate cut we could see a subtle increase before the end of the year, which would create room for retailers to 'reflect' the lower VAT rate in prices in the New Year," he noted, adding that inflation is expected to reach about 5 percent at the start of next year. am/df