Over the first eight months of this year, inflation in Tajikistan’s consumer goods has stood at 3.3 percent, which is 1.2 percent lower than in January-July this year, according to the National Bank of Tajikistan (NBT).
Tajikistan’s financial regulator says the inflation rate has decreased due to deflation observed in the country in August.
The NBT notes that the cost of products of the food industry in August decreased in the country on average by 2.5 percent.
The decrease in cost of products of the food industry was reportedly caused by a 4.8-percent decrease in prices for wheat flour; 3.4-percent decrease in prices for bakery products and groats; 6.3-percent decrease in prices for vegetables; 3.9-percent decrease in prices for vegetable oils and fats; 3.0-percentr decrease in prices for fruits; 3.6-percent de crease in prices for sugar; 2.3-percent decrease in prices for milk; 1.1-percent decrease in prices for lamb; and 0.2-percent decrease in prices for chicken meat.
Meanwhile, prices for non-foodstuffs and prices and rates for services rendered to the population have reportedly increased over the reporting period, but insignificantly: 0.3 percent and 0.1 percent, respectively.
Deflation is when the prices of goods and services fall. Deflation expectations make consumers wait for future lower prices. That reduces demand and slows growth. Deflation is worse than inflation because interest rates can only be lowered to zero. Deflation is bad when it occurs in reaction to previous over-inflation.
Effects of deflation include; declining demand, which perhaps is one of the most prominent effects of deflation; unemployment and lower wages (as businesses see lower levels of demand, they also see lower profits and a reduced need for workers); debt burden grows (as deflation takes hold, prices and incomes decline); reduced Investment; and strengthening currency.
By the way, Tajikistan’s central bank on August 22 raised the refinancing rate from 13.25 percent to 13.50 percent, explaining this by curbing inflation in the medium term.
