Escalating Inflation Persists in Belarus: EADB Offers Explanations for the Trend
In a concerning development for the Belarusian economy, inflation has surged to 7.3% in June 2025, marking the highest annual rate since early 2023. This figure significantly exceeds the government's target of 5% for the full year, casting doubts on the achievability of the goal.
The primary drivers of this inflationary surge are the food sector and regulated prices, which have seen sharp increases. Food prices, in particular, have risen by 10.5% year-on-year in June, following a 9.6% increase in May. Non-food items also experienced a price hike, with inflation reaching 3.6% compared to 3.2% in the previous month.
The escalating trend in inflation is a departure from the planned deceleration, with analysts predicting that the annual inflation rate for 2025 might end closer to or above 7%, well beyond the official 5% target. This outlook strongly suggests persistent inflationary pressures in Belarus for the rest of the year.
Despite the ambitious targets set by the authorities, Belarus's leaders aim to keep inflation below 5% for 2025. However, given the current data, it is likely that inflation will remain elevated unless the government takes decisive action to curb inflationary pressures.
The increase in inflation is not going unnoticed, with experts at the Eurasian Development Bank reporting on the issue in their weekly macroeconomic review. The surge in inflation is also contributing to consumer demand dynamics in Belarus, which are further supported by a growth in real wages. Wages increased by 11.4% in the first five months of 2025.
Credit expansion is another factor contributing to consumer demand dynamics in Belarus. The consumer price index for 2024 increased by 5.2% compared to 2023, meeting the target indicator.
While service prices growth slowed slightly to 7.1% year-on-year in June, they still saw an inflation rise, albeit less significant than in the food sector.
In a silver lining, the consumer price index for 2024 remained within the target, increasing by 5.2% compared to 2023. However, analysts predict that inflation in Belarus could reach 7.7% by the end of 2025, underscoring the need for swift action to address the issue.
The Belarusian authorities had set progressive inflation caps for 2025: 3.3% by mid-year, 3.7% by the end of September, and a final annual ceiling of 5%. With inflation already exceeding these thresholds by mid-2025, it is clear that more stringent measures will be necessary to bring inflation under control.
In conclusion, the escalating inflation in Belarus presents a significant challenge for the government and central bank. The persistent inflationary pressures, particularly in the food sector, call for immediate action to prevent a further rise in prices and maintain economic stability.
Businesses and the finance sector are closely monitoring the escalating inflation in Belarus, as the annual rate could reach 7.7% by the end of 2025, significantly exceeding the government's target of 5%. Analysts suggest this high inflation might result from the surge in food prices, regulated prices increased, and a growth in real wages, which contribute to consumer demand dynamics.
