Skopje, 4 October 2022 (MIA) – Support measures aiming to restrict or freeze the market and the prices in the long term, usually result in short-term, often weak results and the accumulated pressure on businesses and prices ends up escalating even more in the future, which is what we have all been feeling in the past few months, Borche Trenovski, professor at the Faculty of Economics in Skopje, tells MIA.

Each delay causes uncertainty and affects prices

On whether the measures in support of businesses and citizens should have been adopted already, Trenovski says that a concrete plan on the planned measures should be determined and announced as soon as possible. Each delay and unclear interpretation of the measures will cause additional uncertainty, panic, will additionally affect prices and have economic consequences which might worsen in the upcoming period, warns Trenovski.

“When we are faced with a global economic enemy of this kind, everyone is firing with the ammunition and weapon that they have at their disposal, however, in some cases accuracy is especially important,” says Trenovski, pointing to the need for practical use of the measures and their simple and swift implementation.

The behavior of the citizens and businesses, says the professor, depends on their expectations and the information they possess. Every uncertainty, misinformation or lack of information, can significantly affect the behavior of the economic entities and the efficacy of the planned measures. This is why often in the past in many examples from various economies, we have witnessed that sometimes the announcement itself of a particular measure is enough to calm the markets and the ripples in the economy.

“If we were to place ourselves in the shoes of the companies and the citizens, it wouldn’t be difficult to determine that the noise of information or announcements on whether there will be measures or not, whether the trade margins will be restricted, prices frozen, that the prices of raw materials and energy will grow, that maybe we will manage to secure cheaper electricity, that this will be the most difficult winter and there might be a recession etc. All this makes the businesses apply the information and expectations to their prices (by increasing them) and adjust their economic activities in order to protect their interests – profit and survival,” says Trenovski.

From here, he adds, it becomes more apparent why businesses in the country are applying their expectations into the prices and future price policy. For example, despite the reduction of global food prices five months in a row, we are still witnessing increases in the majority of the prices on the domestic market, which in part is also a result of the higher electricity price. The citizens as well, as much as possible, will adjust to the expected situation, altering their behavior and activities within their means and domestic budget, accompanied with certain dissatisfaction or satisfaction by the expected situation.

“It is necessary that a concrete plan is determined and published as soon as possible, a plan which would be a calendar of the planned measures (their gradual implementation or possibility of eventual changes based on the needs), with a clearly defined duration, a clearly defined coverage of businesses and citizens and a clear procedure for their use. Special attention is necessary in overcoming the challenges and in the procedures for practical use of the measures, which have often been stumbling blocks for complete and quick implementation of certain measures in the past – it is necessary for all of this to be simple and quick,” says Trenovski.

Keeping in mind that the budget has a limited capacity, and financial support is vital, two aspects of action are needed.

“Firstly, honest and transparent disclosure of the real fiscal capacity for support through clear presentation of the planned activities for the mobilization of additional funds which would be used as aid. The country’s current capacity of 70-80 million euro, compared to the 10 to 20 times larger packages that are being drawn up by the neighboring EU member states – clearly defines our means. And secondly, designing measures predominantly targeting those who need it most – the most affected businesses and groups of citizens,” Trenovski points out.

He believes that direct support of the most vulnerable citizens/businesses is a way to soften the blows of the rising prices in a more effective manner – the logic is as follows – you have a limited amount of budgetary funds (which are very difficult to increase in a short period of time), you have citizens/businesses with a different capacity of dealing with the price/economic blows – this suggests that the best plan of action would be offering support where it is most needed, and excluding a part of businesses and citizens who have a certain capacity of dealing with the blows of the crisis and adjusting to the market.

“The experiences and the measures undertaken to that end fit in several domains – either you provide financial resources in a targeted manner, or you exempt vulnerable citizens and businesses from certain expenses and subsidize them. Some of the possible measures that can be taken and combined in accordance with our fiscal abilities include: electricity and food vouchers for pensioners or people with minimal income, tax exemption for those with minimal income, targeted subsidizing of electricity bills for vulnerable citizens/businesses, etc.,” says Trenovski.

These measures, he says, should be accompanied by other structural changes and activities, such as activities to encourage saving electricity and increasing the domestic production of food.

Prime Minister Dimitar Kovachevski said Monday that concrete anti-crisis measures aimed at supporting the most vulnerable groups of citizens will be announced very soon. More information regarding the measures is expected Wednesday when the government Economic Council will meet.

“The lists of citizens set to receive financial aid are already being drafted,” said Kovachevski.

According to him restricting trade margins is working, but that the inputs – the fuels and raw resources, which the producers of basic food products receive, are driving the increase in prices and this is practically the case in all countries.

“We are all aware of the rising food prices, especially concerning basic food products. The Government initially froze the prices, however, since we are an open economy which trades with foreign partners, freezing prices for a long period is impossible, because there won’t be enough products, so we moved to restrict the trade margins,” said Kovachevski.

By decision of the Government, since June the trade margin for white bread, sugar and sunflower oil has been set to five percent in wholesale and retail trade, while the margin for eggs, flour, macaroni and spaghetti made of durum wheat, white rice and milk has been set to 10 percent. The decision which was initially meant to be valid until the end of September has been extended until the end of the year.

Despite the trade margin restrictions, the increase in prices in the past period has continued, and the Consumers Organization of Macedonia has received numerous complaints.

According to the State Market Inspectorate, the price restrictions are generally being respected.

“The State Market Inspectorate is constantly on the ground, the price restrictions are generally being respected, any violations are being sanctioned,” the Inspectorate told MIA.

Regarding the difference in prices of the products, they said it is the businesses that determine the prices in accordance with their costs, the growth of import prices, their production costs and so on. As long as it is within the framework of the Decision, it is not punishable by law.

Fines for companies that have been found to have committed irregularities range from 800 to 10.000 euro, depending on the size of the business.

“During the past three months of July, August and September, the State Market Inspectorate has carried out 5.320 inspections due to various reasons but most of them because of violations of the Trade Law, the Government’s decision to restrict the trade margins of certain goods, the Law on Tourism Activity, tobacco and tobacco products trade, Law on Protection Against Smoking, etc.” said the State Inspectorate.

Because of the rising prices the Consumers Organization of Macedonia has called for new measures and mechanisms to protect the consumers.

“There is a large increase in the prices of products, the consumers constantly send us their complaints. We appeal that new measures are adopted, through new mechanisms. We don’t know if in some way this is an artificial increase, i.e., how high the costs of the distributors and manufacturers are to result in prices changing from one day to the next, even by half of the original price, which does not make a lot of sense,” said Martina Grncharevska from the Consumers Organization of Macedonia.

The Ministry of Economy claims that with the new legislation there will be larger fines for unfair commercial market practices. It further announced that a high level of consumer rights protection will be ensured and easier business conditions will be guaranteed.

The National Bank registered an average inflation rate of 11.6 percent in the January-August period of 2022. The cost of living, according to the State Market Inspectorate’s calculations, has increased by 16.8 percent in August 2022 as compared to the same month in 2021, while retail prices have increased by 14.2 percent. ad/ba/