‘All Financial Indicators Are Simply Screaming And Ringing Alarm Bells’

• 25.09.2024, 16:19

What will price regulation lead to in Belarus?

Economist Alisa Ryzhychenka spoke about the sad consequences of price regulation.

— Price relaxation is not expected, given that inflation has begun to gain momentum, and it is only the middle of the year. As a rule, inflation accelerates in the second half of the year, especially after the summer months, when the seasonality passes, everyone returns from vacations and summer cottages and begins to prepare for the school season, the working season, the New Year, — Alisa Ryzhychenka speaks about the price regulation on “Ordinary Morning”».

According to the expert, such price regulation contradicts economic principles and the existence of the market as such.

— In fact, the point of doing business is lost. Let's say a private trader buys goods at one price, sells them at another, while buyers are ready to buy these goods at such a price. But the authorities tell him: “No, stop, you can't, let's lower the price.”

This is interference in any business, be it private or public.

But the main thing is that private business — the main pillar of the economy — simply loses its meaning in Belarus in this form.

Of course, this is absolutely wrong and ineffective. It is easier to let people earn money so that they pay taxes from their income and replenish the state budget. We have the opposite: we will not let you earn money, but at the same time you are obliged to pay into the budget.

At the same time, all financial indicators are simply screaming and ringing the alarm bells that soon we will not be able to pay taxes, salaries, or loans, says Ryzhychenka.

To confirm her words, she gives several illustrative examples.

— Let's say, logically, the cheapest prices for vegetables and fruits should be in the summer. Especially now — in August-September, when we have our own fruit and vegetable products.

But this is not happening. On the contrary, we are seeing a record rise in prices — the increase in vegetables and fruits was 19%. And this, I repeat, is in season. What can we say about other goods?

As I said, by the end of the year, inflation always picks up speed, and this will primarily affect those goods that we cannot grow on our territory, for example, vegetables and fruits that are imported. Prices for them will not stop.

For Belarusian producers, costs are growing incredibly, and therefore prices are changing even under price regulation.

In such conditions — restrictions on trade markups, restrictions on profitability for private traders — retail chains can, in principle, survive only due to sales volumes.

Not due to what they earn, but only due to how much they sell. However, only large chains with many stores located in good locations, the same Euroopt, can take advantage of this.

Stores that focused, say, on the premium segment, for example, Green, Korona and the like — it is much more difficult for them to survive.

At the same time, the chains do not have the working capital to develop and open new stores. They cannot afford it due to limited resources. They have already held out for a year, two, and now everything is declining, profitability is decreasing, the amount of working capital is decreasing and the ability to continue to pull those stores that are unprofitable, low-profit, is decreasing.

This will lead to the fact that the chains will make decisions to close some less profitable stores, for example, in regions where serious competition is made by the same Euroopts, Dobronoms and other stores that offer goods at reduced prices.

At the same time, the Russian share in retail is very large. Now we are witnessing a redistribution of the market, when for the goodies that Lukashenka received from Russia, he has to actually give private business into the hands of Russian entrepreneurs.

In fact, take away, bankrupt the networks that were owned by Belarusians, and give them into the hands of Russians for next to nothing.

However, if you look at the indicators, then the revenue of some networks has really grown by 10-15%. But, I will note, their profit has not grown proportionally. The cost price has grown even more, so net profit and profit from sales, on the contrary, have decreased for all chains.

And revenue has grown due to the fact that the authorities are actively stimulating domestic demand, raising people's salaries, issuing cheap loans, especially for goods from Belarusian manufacturers.

In August, consumer demand has grown by 39% — these are record figures. Due to this, revenue is also growing. But, I repeat, this does not mean that profit is growing, — the expert emphasized.

She is especially alarmed by the possible consequences of such manual regulation, which can cause an explosion of the very inflationary overhang.

— How will this happen? On the one hand, imports may become very expensive when the restrictions are lifted. On the other hand, prices may start to rise sharply, and we will see double-digit inflation — around 15%.

There may be different scenarios, but it is certain that prices will rise. And against this background, real incomes of the population will immediately decrease. All salary increases, cheap loans will be eaten up by this inflation. And Belarusians will again begin to live poorly and directly feel it, — warned Ryzhychenka.