“Wage increase will lead to price increase and inflation” – Economist
“The calls for price increases in 2023 are quite serious. Increases in the cost of production of products are higher. We produce prices when looking at the index, we see that this indicator has increased even more. But it could not be fully transformed into the market. Why? Because in the market prices not only determines the cost. At the same time, other factors also affect it. Including the purchasing power of the population”.
This was said by economist expert Rashad Hasanov.
According to him, when the purchasing power is low, it partially neutralizes the pressure in the direction of rising prices. Since the costs incurred in the production process are not yet fully passed on to the market, from time to time companies evaluate these opportunities in the market. The only factor in the direction of the increase in purchasing power that the government announced social packages are:
“But one point should be noted here. How much additional funds will these packages bring to the market? From the two packages announced so far, it is clear that their total annual cost will be approximately one million one hundred thousand manats. If we look at last year’s consumption volume, this year the consumption volume in the market is more than 50 billion annually, and about 4 billion per month. billion we assume it will be around half. In that case social The amount that the packages will enter the market during the month is one hundred million manats in the best case. That is 4 billion 100 million manats in exchange for one and a half means, at best, a 2-2.5 percent increase in the money supply during the month, which, of course, will lead to an increase in prices. Even if the packages are not fully disclosed, the companies will have to do it.”
The economist noted that, however, the level of inflation caused by the said increases will not be very large:
“That is, it would not be correct to associate the price increase that has occurred since 2023 only with these packages. The inflation contribution of these packages can be between 0.5-1.5 percent. (Bakupost.az)
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