The increase in tariffs for electricity and gas in Uzbekistan will add 2.4 percentage points to the overall inflation rate, according to a comment from the Central Bank on monetary policy for the first quarter.
In particular, it is forecasted that the rise in prices for electricity will accelerate inflation by an additional 1.2 percentage points, natural gas by 1 percentage point, and liquefied gas by 0.2 percentage points.
The regulator noted that electricity tariffs for legal entities were increased last year, so the secondary effect of this will not be high, considering that the new tariffs are only introduced for households. It is noted that this secondary effect is mainly related to the degree of change in inflation expectations.
Inflation expectations of the population and businesses to some extent reflect the factor of rising energy resource prices (this topic is widely discussed lately). In addition, the proposed social norms and payment deferral options may help mitigate the negative impact of changes on inflation expectations, as stated in the overview.
The Central Bank also stated that it will take some time to assess how inflation expectations will change due to the tariff increases.
According to the Central Bank's forecast, ensuring uninterrupted energy resource supplies is crucial to contain the impact on price growth.
The regulator also noted the impact on overall inflation of canceling the zero VAT rate for certain medical and veterinary services, medicines and veterinary drugs, as well as medical and veterinary products, and utility services (cold water and sewage, heating, and hot water).
In particular, it is expected that these changes in taxation will increase inflation by an additional 1 percentage point, but a return to a downward trend is expected from the fourth quarter.
Furthermore, due to the acceleration of inflation, real incomes of the population may decrease slightly, as noted by the Central Bank.
Taking this into account, the Central Bank raised the forecast for overall inflation under the base scenario in 2024 from 8-9% to 9-11%.
