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Inflation rate hits 13.6%

Slovakia's headline inflation rate soared to an annualised 13.6% in July from 7.1% the month before, but analysts said most of the rise was due to recent price deregulations and a new import surcharge.
"Price developments are basically in line with projections," said Martin Barto, chief of the strategy section at state bank SLSP. Barto explained that analysts had expected the effects of the 7% import surcharge, imposed on June 1, to be felt in July.
The government announced a package of economic austerity measures in May designed to raise revenue for the state budget and slash the fiscal deficit. The key components of the package were the imposition of the import surchage, a rise in the lower limit of VAT to 10% from 6%, and further price deregulations.

Slovakia's headline inflation rate soared to an annualised 13.6% in July from 7.1% the month before, but analysts said most of the rise was due to recent price deregulations and a new import surcharge.

"Price developments are basically in line with projections," said Martin Barto, chief of the strategy section at state bank SLSP. Barto explained that analysts had expected the effects of the 7% import surcharge, imposed on June 1, to be felt in July.

The government announced a package of economic austerity measures in May designed to raise revenue for the state budget and slash the fiscal deficit. The key components of the package were the imposition of the import surchage, a rise in the lower limit of VAT to 10% from 6%, and further price deregulations.

The central bank revised its monetary programme following the government measures and now targets headline inflation for the end of the year at 13.5 to 15.5%.

ING Barings' chief economist in Bratislava, Ján Tóth, said deregulation accounted for more than 3.0 percentage points out of the total 5.8% July monthly rise. Policy makers, he said, need not panic over the figures, although they should ensure that they do not translate into an explosion of higher and higher wage demands.

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