The growth of wages in Montenegro, through the implementation of the Europe Now program, did not affect the jump in inflation, Prime Minister Milojko Spajić announced, adding that it was a spin that was constantly used.
At a panel discussion titled Analysis of Prices and Operations of Retail Chains in Montenegro, which was organized today at the Faculty of Economics in Podgorica, he said that inflation was not affected by either margins or growth in demand.
"The analysis showed that import inflation in the period from 2021 to 2023 cumulatively amounted to 29 percent, and food inflation to 31 percent, which imposes the only logical conclusion that inputs are the essential cause of inflation," said Spajić.
He recalled that margins have been limited since September last year, while the Europe Now 2 program was being implemented in parallel.
"The average inflation in November, December and January in Montenegro was lower than in the eurozone. This is an excellent indication that net earnings are not included in the company's costs, which was a spin that was constantly used," said Spajić.
He added that in small economies, like Montenegro's, wage growth cannot affect inflation.
Spajić also announced that demand in Montenegro has not increased since 2022, which means that more products have not been purchased, or that wage growth has not increased demand, nor has it affected inflation.
He believes that before 2022, a "wild economy" prevailed on the Montenegrin labor market, as most employees received part of their wages "in cash".
Spajić also said that before the implementation of the Europe Now 1 and 2 programs, there were 210 thousand employees in Montenegro, while today there are 287 thousand.
"Do you believe that in two and a half years, almost 80 thousand jobs have been created in Montenegro? Of course not. Those are 80 thousand jobs that have been legalized," Spajić explained.
He also said that the share of labor in gross domestic product (GDP) has increased, while productivity has fallen, but that this decline is not realistic.
"When it comes to retail chains, their margins fell in 2022, but they are recovering in 2023, which is best seen in the net profit that has tripled in two to three years," said Spajić, adding that it is very important for the Government that the economy does well.
He assessed that the analysis discussed the impact of wage growth on inflation was flawed.
"You used data from Monstat, which used bad data in 2021 and previous years, because the shadow economy was too large," Spajić explained.
Professor at the Faculty of Economics, Maja Baćović, presented the analysis Macroeconomic Environment in Montenegro for the period from 2021 to 2023, which primarily relates to the food and beverage sector.
She said that their goal was to examine whether retail chains had influenced the rise in food prices through their costs.
"The increase in purchase prices, material costs in the trade sector and the increase in gross salary costs had the greatest impact on price growth. The profits of retail chains remain stable," said Baćović.
She said that price increases occur when wages grow faster than labor productivity.
Baćović added that the introduction of margins on a certain number of food products has a negative effect on a certain number of trading companies.
She said that food prices were not rising due to changes in margins in any trade sector, but rather due to inputs used in the trade sector.
The study, she said, did not address the causes of wage growth.
The Head of the Prime Minister's Office, Branko Krvavac, said that the starting points in the analysis are not good.
"You said that when earnings grow faster than productivity, price increases are inevitable. Company profits change significantly, but there has been no loss in these companies. There are 15 new employees in the trade sector," said Krvavac.
He stated that at a time of limited margins, we have monthly deflation.
"We have limited margins, we have the Europe Now program and we are below the EU inflation zone. You have France, Bulgaria and when you take the EU zone we are below inflation. There was no Europe Now there, no growth in net wages, no reduction in the tax burden on labor and you have higher rates there than here," said Krvavac.
He said that the implementation of Europe Now itself has not had a negative impact on companies or on the revenues of companies, but has instead increased the profitability of companies.
The Dean of the Faculty of Economics, Mijat Jocović, asked what kind of professors they would be if they had chosen not to study.
"What kind of professors would we be if we said we had no opinion and were afraid to express it. What kind of society would we be if professors said they were incompetent and had no opinion," Jocović asked.
He said that the professors had no dilemma about whether they should do the study.
Jocović announced that the study and the limitation of margins open up a fundamental issue - and that is the issue of the character of the economic institutions being created in Montenegro and which, as he claims, must be open.
"The essence is monopolies and we need to answer whether they exist in Montenegro in any markets, not just food retail, and whether someone is abusing the market. Monopolies are determined by functional institutions, not professors at the Faculty of Economics," said Jocović.
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