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LOWEST EVER INFLATION MEETS EXPECTATIONS OF ANALYSTS, CENTRAL BANK

Inflation dips to 3.4 percent in 2002

CONSUMER prices in Slovakia rose by 0.7 per cent in December from the previous month, the Slovak Statistics Office reported, bringing annual headline inflation to a record 3.4 per cent, just above the central bank's revised target of 2.9-3.2 per cent.
As a result, 2002 will go down as "the most successful year in [Slovakia's] history from the point of view of inflation," UniBanka analyst Viliam Pätoprstý told the TASR news agency.
Observers said they were expecting a rise of about this amount at the end of the year, after several months of relatively insignificant movement. Although low, December's inflation rate was the second highest of any month last year.

CONSUMER prices in Slovakia rose by 0.7 per cent in December from the previous month, the Slovak Statistics Office reported, bringing annual headline inflation to a record 3.4 per cent, just above the central bank's revised target of 2.9-3.2 per cent.

As a result, 2002 will go down as "the most successful year in [Slovakia's] history from the point of view of inflation," UniBanka analyst Viliam Pätoprstý told the TASR news agency.

Observers said they were expecting a rise of about this amount at the end of the year, after several months of relatively insignificant movement. Although low, December's inflation rate was the second highest of any month last year.

"Inflation figures for December are in line with our assumption that the Slovak economy had already left the calm inflation waters of November," said Pavol Ondriska of Slavia Capital.

Core inflation, the key indicator that excludes changes to regulated prices and excise taxes, was at 0.3 per cent on the month and 1.9 per cent year-on-year in December, meeting the NBS's annual core inflation prediction of 1.9 to 2.2 per cent. Net inflation fell by 0.1 per cent on the month, for year-on-year growth of 2.7 per cent.

The annual inflation rate was chiefly influenced by a 6 per cent increase in the price of cigarettes, as vendors accumulated supplies before prices shot up in January due to increased excise tax. Another factor was the surprising 49.8 per cent increase in public liability insurance for cars, analysts said.

Seasonal price hikes for foodstuffs were 0.1 per cent lower than in the previous year. Prices for vegetables, including potatoes, rose by 7.1 per cent, but prices for meat were lower by 2.8 per cent, continuing a yearlong trend.

There were no significant changes in other categories, which means that the demand inflation pressure "practically remained at zero," according to Ľudovít Ódor from the Slovak Rating Agency.

Of the external factors influencing inflation, higher crude oil prices on world markets was the most significant, experts said. However, the Slovak crown, firming towards the US dollar, offset this increase. The exchange rate also influenced price levels by ensuring low imported inflation.

In December, the highest monthly price hikes were reported for miscellaneous goods and services, up 6.3 per cent, and alcohol and tobacco products, up 2.7 per cent.

Clothing and shoe prices went up by 0.3 per cent, while those for furniture, household furnishing, and regular housing maintenance, recreation and culture, and education rose by 2 per cent each.

Looking ahead, higher inflation is expected in the first few months of 2003, as the effects of the government's reform measures begin to kick in.

"We assume inflation will jump above 7 or even 8 per cent in March, where it should stay until the end of the year when the effects of changes in regulated prices and indirect taxes vanish," said Marek Gabriš, analyst at ČSOB bank.

Economists predict average headline inflation in 2003 will reach 8.2 to 8.6 per cent, and the year-end value could be closer to 9 percent.

- Compiled from press reports

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