CPI inflation picked up to 2.2% y/y in December, recording its highest level since Sep 2013, data of the stat office showed on Friday. The biggest contribution to the acceleration came from transport prices, which rose by 5.0% y/y, after falling by 0.5% y/y in November. This reflected the low base effect from end-2015, when oil prices slumped. The growth of food prices quickened to 2.3% y/y, influenced by the increase of international food prices. In the meantime, the growth of alcohol and tobacco prices moderated further to 6.4% y/y. Looking ahead, we expect prices to continue to rise in the coming months, underpinned by the hike of excise duties and the climbing oil and food prices.
In regards to 2016, CPI inflation came in at 0.1%, which is close to the projections of the central bank and the government, which expected the consumer prices to increase by 0.2%. The biggest upward pressure came from alcohol and tobacco prices, which went up by 6.4% due to the increase of the excise duties on these goods at the beginning of 2016. Meanwhile, clothing and recreation prices rose by 3.4% and 1.2%, respectively, aided by solid growth of household consumption. Hotel prices reported noticeable increase too as they were affected by the growth of foreign tourist arrivals. On the other hand, transport and housing prices declined by 3.0% and 1.7%, respectively, because of the lower energy prices.