Visit-Montenegro.com : Merchants Increasing Prices Even Without Reason

Podgorica (MINA-BUSINESS) – Inflation rate, measured by the index of consumer prices during the first half of the year has been 5, 3 percent, while the real growth of the gross domestic product amounted to eight percent, report of the main economists of the Montenegrin Central Bank (CBCG) states.

Such increase of the GDP shows that Montenegro was one of the fastest developing countries in the group of European economies in transition, CBCG has stated. Council of this institution has adopted the report of the main economist for first half of 2008.

Montenegrin inflation rate, which corresponds with the regional average, had no negative impact to the relatively high increase of the GDP and employment.

“Main reason for inflation’s increase has to do with the outside factor, first and foremost increase of prices of agricultural products and food, as well as more expensive oil derivates on the worlds markets and electricity”, CBCG noted.

This financial institution finds that the increase of inflation has also been significantly influenced by interior factors, bearing in mind misuses of market position on the side of some merchants and producers.

“They have increased the prices of their products much more than the increase of their expenses, using overall increase of prices as an excuse”, statement of the CBCG reads.

Inflation growth had also influenced inflation expectations, so that certain number of companies increased prices of their products, fearing that their incomes would lose value due to the higher inflation rate.

CBCG reminds that the increase of prices had also been influenced by the increase of aggregate demand, which is the consequence of the increase of purchasing power.

Representatives of the CBCG also noted that the possibilities for fighting the inflation in a country which uses Euro as its’ currency are quite limited.

“Third group of factors could be influenced with strengthening of anti-monopoly policies, as well as with the temporary decreases of taxes and other fees”, CBCG noted.

Montenegrin Central Bank also reminded that the increase of inflation was a global phenomenon, which had also occurred in developed countries and that the inflation rate in the EU reached four percent at the end of June, which is a two times increase in comparison to the same period from two years ago.

CBCG finds that the measures of this financial institution to limit expansion of loans in Montenegro have shown results, as the rate of increase of allowed loans during the first six months of this year has been three times lower than has been the case during the same period last year and it amounted at 21,1 percent.

“Participation of restricted deposits is increasing. At the end of June, they made up 60 percent of total amount, which is by 12,5 percentage points more in comparison to the same month last year”, statement of CBCG reads.

They claim that the fiscal policy is still on healthy grounds, so that the surplus of the budget in the first half of the year amounted to EUR 78.1m. Total public debt amounts to 31.6 percent of GDP, and foreign debt to 16.3 percent.

According to “Monstat’s” data, number of tourists who have visited Montenegro during the first six months of 2008 has increased by 13, 3 percent in comparison to the same period last year. Tourism incomes have increased in comparison to the reference period in 2007 by 27 percent or Euro 99 Million.

CBCG has stated that the net capital income from abroad had been Euro 913, 9 Million and that it gave significant impetus to economic growth.

They claim that the net capital influx from abroad had been smaller than it had been in the first half of last year and amounted at Euro 311, 5 Million, while its’ structure has improved through the increase of investment into banks and companies.

“There is an increase of the tendency that domestic companies appear as foreign investors in other countries and, on this basis, investment amounted at Euro 27, 5 Million during the first half of 2008”, CBCG concludes.