Governor for Večernji list: We are hoping that the prices will mitigate by the end of 2022

When will the inflation shocks calm down, what factors affect the process of slowing down and stopping the growth of prices, how big economic growth awaits us this year after an exceptionally good 2021 - these are the questions of economic and financial nature whose answer could give some guidelines, however, there are still many factors that continue to cause the uncertainty.

Real growth of GDP

The Central Bank of BH hopes, like most analysts from the eurozone, that the growth of prices will calm down towards the end of this year, but there are many factors that affect this,  said, among other things, in an interview with Večernji list Senad Softić, Ph.D., Governor of the Central Bank of BH, who commented on the current issue of inflation, confirming that the goal of the European Central Bank (ECB) is an inflation being close to 2% in the medium term.

- However, the latest trends have surprised many experienced economists. Prices in the euro area are particularly affected by energy prices such as gas and oil, but also by food prices. In BH, according to the latest available data, inflation in December amounted to 6.4% (on an annual basis), and increased inflation was influenced by rising transport prices (including fuel prices) by 14.1%, followed by rising food prices by 10.6%, as well as an increase in electricity and gas prices by 5% - said Softić.

In this context, he explained that, although we are used that, especially after the global financial crisis, central banks are doing everything in their power to alleviate negative impacts, we must be aware that global commodity prices such as oil, gas and grains being major drivers of inflation, are not influenced by monetary policy. When it comes to slowing down the dynamics of price growth, Softić said that they hope, like most analysts from the eurozone, that by the end of this year there will be a slowdown in price growth. But, there is a lot of factors influencing it. There are geopolitical tensions related to Europe, and specially Ukraine. The prices' trends of imported gas and naphtha are specially uncertain. We should not forget that there are still present issues in so called supply chains globally, thus in our country, too.

The risks are high, he says and repeats that their current forecasts show inflation pressures in BH decreasing in the second part of the year, particularly towards its end.

Governor also commented on the economic growth projections, reminding that statistics show the growth of real GDP in the first nine months of 2021 in BH was even 8.7%. In the CBBH, we believe that real growth in 2022, for the entire year, could be around 4%. In the latest January projections for 2022, the IMF expects the growth of global GDP of 4.4%, and that in the euro area at the level of 3.9%. So, BH economy should be somewhere near that level as well. This is certainly good news, as growth is also expected in 2023, although at a slower pace. BH certainly needs economic growth. By sustainable and stable economic growth only, we can ensure the growth of standard of all our citizens, which is the final goal of all economic policies, Softić said.

Strengthening investment

Regarding the question how the investment cycle can be strengthened, Softić said that, although central banks are apolitical institutions, he has to say that calming down of political tensions in the country, such as, for example, regular work of state institutions and focus on the actual economic reforms would be the strongest generators of the investment cycle strengthening.

-Both domestic and foreign investments prefer stable frameworks. No monetary policy can increase investment if uncertainty is high. In that context, I need to mention constant efforts of the Central Bank that the necessary reforms in the country should be carried out independently, but also with the assistance of the International Monetary Fund – he pointed out.

- However, the latest trends have surprised many experienced economists. Prices in the euro area are particularly affected by energy prices such as gas and oil, but also by food prices. In BH, according to the latest available data, inflation in December amounted to 6.4% (on an annual basis), and increased inflation was influenced by rising transport prices (including fuel prices) by 14.1%, followed by rising food prices by 10.6%, as well as an increase in electricity and gas prices by 5% - said Softić.

In this context, he explained that, although we are used that, especially after the global financial crisis, central banks are doing everything in their power to alleviate negative impacts, we must be aware that global commodity prices such as oil, gas and grains being major drivers of inflation, are not influenced by monetary policy. When it comes to slowing down the dynamics of price growth, Softić said that they hope, like most analysts from the eurozone, that by the end of this year there will be a slowdown in price growth. But, there is a lot of factors influencing it. There are geopolitical tensions related to Europe, and specially Ukraine. The prices' trends of imported gas and naphtha are specially uncertain. We should not forget that there are still present issues in so called supply chains globally, thus in our country, too.

- However, the latest trends have surprised many experienced economists. Prices in the euro area are particularly affected by energy prices such as gas and oil, but also by food prices. In BH, according to the latest available data, inflation in December amounted to 6.4% (on an annual basis), and increased inflation was influenced by rising transport prices (including fuel prices) by 14.1%, followed by rising food prices by 10.6%, as well as an increase in electricity and gas prices by 5% - said Softić.

In this context, he explained that, although we are used that, especially after the global financial crisis, central banks are doing everything in their power to alleviate negative impacts, we must be aware that global commodity prices such as oil, gas and grains being major drivers of inflation, are not influenced by monetary policy. When it comes to slowing down the dynamics of price growth, Softić said that they hope, like most analysts from the eurozone, that by the end of this year there will be a slowdown in price growth. But, there is a lot of factors influencing it. There are geopolitical tensions related to Europe, and specially Ukraine. The prices' trends of imported gas and naphtha are specially uncertain. We should not forget that there are still present issues in so called supply chains globally, thus in our country, too.

- However, the latest trends have surprised many experienced economists. Prices in the euro area are particularly affected by energy prices such as gas and oil, but also by food prices. In BH, according to the latest available data, inflation in December amounted to 6.4% (on an annual basis), and increased inflation was influenced by rising transport prices (including fuel prices) by 14.1%, followed by rising food prices by 10.6%, as well as an increase in electricity and gas prices by 5% - said Softić.

In this context, he explained that, although we are used that, especially after the global financial crisis, central banks are doing everything in their power to alleviate negative impacts, we must be aware that global commodity prices such as oil, gas and grains being major drivers of inflation, are not influenced by monetary policy. When it comes to slowing down the dynamics of price growth, Softić said that they hope, like most analysts from the eurozone, that by the end of this year there will be a slowdown in price growth. But, there is a lot of factors influencing it. There are geopolitical tensions related to Europe, and specially Ukraine. The prices' trends of imported gas and naphtha are specially uncertain. We should not forget that there are still present issues in so called supply chains globally, thus in our country, too.

- However, the latest trends have surprised many experienced economists. Prices in the euro area are particularly affected by energy prices such as gas and oil, but also by food prices. In BH, according to the latest available data, inflation in December amounted to 6.4% (on an annual basis), and increased inflation was influenced by rising transport prices (including fuel prices) by 14.1%, followed by rising food prices by 10.6%, as well as an increase in electricity and gas prices by 5% - said Softić.

In this context, he explained that, although we are used that, especially after the global financial crisis, central banks are doing everything in their power to alleviate negative impacts, we must be aware that global commodity prices such as oil, gas and grains being major drivers of inflation, are not influenced by monetary policy. When it comes to slowing down the dynamics of price growth, Softić said that they hope, like most analysts from the eurozone, that by the end of this year there will be a slowdown in price growth. But, there is a lot of factors influencing it. There are geopolitical tensions related to Europe, and specially Ukraine. The prices' trends of imported gas and naphtha are specially uncertain. We should not forget that there are still present issues in so called supply chains globally, thus in our country, too.

- However, the latest trends have surprised many experienced economists. Prices in the euro area are particularly affected by energy prices such as gas and oil, but also by food prices. In BH, according to the latest available data, inflation in December amounted to 6.4% (on an annual basis), and increased inflation was influenced by rising transport prices (including fuel prices) by 14.1%, followed by rising food prices by 10.6%, as well as an increase in electricity and gas prices by 5% - said Softić.

In this context, he explained that, although we are used that, especially after the global financial crisis, central banks are doing everything in their power to alleviate negative impacts, we must be aware that global commodity prices such as oil, gas and grains being major drivers of inflation, are not influenced by monetary policy. When it comes to slowing down the dynamics of price growth, Softić said that they hope, like most analysts from the eurozone, that by the end of this year there will be a slowdown in price growth. But, there is a lot of factors influencing it. There are geopolitical tensions related to Europe, and specially Ukraine. The prices' trends of imported gas and naphtha are specially uncertain. We should not forget that there are still present issues in so called supply chains globally, thus in our country, too.

- However, the latest trends have surprised many experienced economists. Prices in the euro area are particularly affected by energy prices such as gas and oil, but also by food prices. In BH, according to the latest available data, inflation in December amounted to 6.4% (on an annual basis), and increased inflation was influenced by rising transport prices (including fuel prices) by 14.1%, followed by rising food prices by 10.6%, as well as an increase in electricity and gas prices by 5% - said Softić.

In this context, he explained that, although we are used that, especially after the global financial crisis, central banks are doing everything in their power to alleviate negative impacts, we must be aware that global commodity prices such as oil, gas and grains being major drivers of inflation, are not influenced by monetary policy. When it comes to slowing down the dynamics of price growth, Softić said that they hope, like most analysts from the eurozone, that by the end of this year there will be a slowdown in price growth. But, there is a lot of factors influencing it. There are geopolitical tensions related to Europe, and specially Ukraine. The prices' trends of imported gas and naphtha are specially uncertain. We should not forget that there are still present issues in so called supply chains globally, thus in our country, too.đđđžžđ