Inflation in 2023 ended as expected, but will 2024 end as expected? Will 2024’s inflation come down to the 36 percent predicted by the Central Bank, let alone the 33 percent projected in the medium-term program?
First, let us underline a detail about 2023. We say that 2023 ended as expected in terms of inflation, but we should also look at what was expected. Although the 65 percent inflation forecast for 2023 was mentioned near the end of the year, in the medium-term program for the 2023-2025 period, which was made before entering 2023, last year’s inflation target was only 24.9 percent. We revised it up to 65 percent and then we hit the forecast with 64.77 percent.
The most curious question now is whether the projected 36 percent in 2024 can be maintained.
We have analyzed this issue for who knows how many times, but it is time, and it would be useful to discuss it in detail once again.
But before making a forecast for the whole year, let’s look at January…
January’s increase is likely to exceed 7 percent…
Just two days ago, on January 2, I wrote in this column that January inflation could reach 5 or 6 percent. I have to revise this prediction very early. Based on fuel hikes, exchange rate hikes and my observations in the market, I should state that I expect the January increase to be around 7 percent, and I do not see it as possible to go below this rate.
The increase in January last year was 6.65 percent. I believe that this time the rate will exceed last year’s rate.
A quiet increase in the dollar…
We are only a few days into January and the dollar’s average for these few days is 1.8 percent higher than the average for December.
Even if the dollar remains stable at its current level in the following days of the month, it will increase by 2.2 percent in January compared to the December average. This is not an insignificant rate.
As a reminder, the dollar rose by only 0.6 percent in January last year compared to December 2022.
Moreover, this month’s increase will probably exceed 2.2 percent.
The Central Bank announced that it expects inflation at the end of 2024 to be between 30 percent and 42 percent, with a midpoint of 36 percent. Such a wide range would not usually be seen. Obviously, in the event that 36 percent is exceeded and inflation reaches 40 percent, the Central Bank will take refuge in the justification of “I had already said that it could go as high as 42 percent”.
Because it is almost impossible to finish the year at 36 percent.
As I have written before, the 74-75 percent in May indicates that the average monthly increase in the first five months is projected to be 4 percent. However, if the increase in January reaches 7 percent, the monthly increase margin in the February-May period shrinks to around 3.25 percent.
Staying at 36 percent at the end of the year requires keeping the average monthly increase in the last seven months of the year at 1.6 percent.
And to what extent the targets set at the beginning of the year have been met.
Here are the CPI increase targets and realizations in medium-term programs:
- 2015 target 6.30 percent, realization 8.81 percent.
- 2016 target 7.50 percent, realization 8.53 percent.
- 2017 target 6.50 percent, realization 11.92 percent.
- 2018 target 7.00 percent, realization 20.30 percent.
- 2019 target 15.90 percent, realization 11.84 percent.
- 2020 target 8.50 percent, realization 14.60 percent.
- 2021 target 8.00 percent, realization 36.08 percent.
- 2022 target 9.80 percent, realization 64.27 percent.
- 2023 target 24.90 percent, realization 64.77 percent.
As you may have noticed, there is only one year in these nine years where the realization is lower than the target, 2019…
