CPI inflation eases to 1.1% y/y in North Macedonia

The CPI inflation eased to 1.1% y/y in February from 1.2% y/y in the previous month, according to the latest data from the stats office. Consumer price growth eased mainly on the back of transport prices, which declined by sharper 3.7% y/y in the month compared to 2.9% y/y drop in January. We note that the sharper drop in transport prices is related to base effects from the higher international oil prices last year and their sharp drop towards the end of 2018 and the start of 2019. On the other hand, food inflation accelerated further to 2.3% y/y in February from 2.0% y/y in the previous month. The growth in food prices was the highest since March last year and data from the first two months of 2019 show that food charges may be an inflation driver this year. The volatile vegetable prices were again a major driver of food inflation as their growth accelerated to 27.0% y/y in February from 22.0% y/y in January. Prices of non-durable goods edged up to 1.4% y/y in the month, likely due to higher food prices.

The CPI inflation averaged 1.5% y/y in 2018, below the central bank’s revised forecast of 1.7% y/y and initial forecast of 2.0% y/y. The central bank expects the inflation to accelerate to 2.0% in 2019 and said that its projections reflect expectations for foreign inflationary pressures, coming mainly from food and energy import prices. The central bank expects that inflationary pressures from the improving domestic demand will be moderate. The IMF also expects the CPI inflation to accelerate to 2.0% y/y in 2019.

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