Rising prices in Macedonia trigger calls for government action

15/04/2008

Prices in Macedonia continue to soar, prompting the public to call for government intervention.

By Goran Trajkov for Southeast European Times in Skopje – 15/04/08

The price of cooking oil is soaring, along with those of petrol and heat. [Tomislav Georgiev]

The latest in a series of price increases in Macedonia -- on cooking oil, petrol and heat -- has resulted in a public outcry. Many say their salaries cannot keep up with rising prices. "It is very difficult. If this trend continues, what will the result be?" one consumer asks. However, government efforts at containing inflation remain unsuccessful to this point.

Local economists fear that inflation will surpass 10%. In January, authorities reported annualised inflation of 8.7% and suggested that the government lower budget expenses and subsidise the agricultural sector. "If, in the first month of the year, you have high inflation and if you do not take adequate measures, the year may end with an inflation rate above 10%. There is room for panic, and the government should strive to lower inflation," Macedonian University economics professor Zoran Ivanovski said.

Many say that the rise in prices is tied to global increases in oil and gas prices but that the country must neutralise the effects nonetheless. Government officials, however, say that there are no more options for intervention. "We as a government are using everything that we have on disposal as a market-oriented country," Deputy Prime Minister Zoran Stavreski said.

"The current situation is caused by the drought and worldwide climate change. The price of wheat went up. We are looking at the … experiences of other countries, and soon we will come up with some measures, but it won't be something spectacular. I do not expect that we will have serious annual problems with inflation," Prime Minister Nikola Gruevski said.

At the end of last month, Stavreski said the government expected a break in inflationary momentum. "The figure should not breach the 6% mark by the end of 2008," he told media.

In just a few months, prices of key goods and services rose almost 50%, prompting the government to increase pensions and salaries in the public sector by 10%.

The National Bank also took pro-active steps to lower the inflation rate. It raised the interest rate on treasury bills from 5.08% to 5.25% and expects the action to curb inflation temporarily.

The increase in direct foreign investment, which was 240m euros in 2007, has helped buoy the economy, which in turn should help control inflation. The country was earmarked for nearly 100m euros in investments just in the first two months of 2008, Stavreski said.