Will the announced reductions in food prices soften the impact on consumers’ household budgets?

The announcement by the President of Serbia, Aleksandar Vučić, that from Wednesday the prices of certain products in markets will drop has been met with negative reactions on social networks, such a move has been deemed demagogic, considering the selection of items and insulting to citizens, while economists and consumer representatives are skeptical that this will lead to the mitigation of the consequences of inflation, which was over 12 percent in July.

As a reminder, we are talking about 20 items that will be marked with “Bolja cena” in stores, most of them of the “Good” brand, which cannot be found in all stores.

“The regular price of parisier is 399, but it will be 259 dinars, yogurt is 164 dinars, and it will be 134. The price of apple juice instead of 120 will be 80 dinars, potatoes are 99, and you will be able to find it for 60 dinars. You will have homemade spice that costs 70 dinars for 50 dinars, shampoo for babies from 107 dinars will be 69.9 dinars, and coffee for 130.99 will be 89.99 dinars,” explained Vučić.

Economist Milan R. Kovačević notes for Danas that some countries have already tried to introduce a similar system, but that such moves are not nearly enough to reduce the impact on the household budget of consumers in conditions of economic crisis. Our interlocutor is of the opinion that it is about poorly selected articles and “classic political propaganda”.

“The reduction of certain products will not cause harm, but it cannot significantly contribute to improving the situation. Items are not well chosen. It was necessary to make agreements with several different companies. Then that move would have been more useful and meaningful, because it would have created a basis for other manufacturers, who did not join, to do so in order to remain competitive. In this way, it could certainly contribute to the reduction of inflation. On the contrary, the discounting method looks like ordinary propaganda, as well as the fact that the president of the country is dealing with these issues,” says Kovačević.

He points out that it is more than obvious that inflation is a taboo subject for the president, but that despite this, measures are taken to keep it high.

“The plan on which the reductions will be implemented should have been designed by professionals who understand marketing and follow trade, not Vučić. Anyone even remotely intelligent will now think that Vučić is trying in this way to show that inflation will decrease, while excise taxes on fuel are increasing. He also decided to pay pensioners 20,000 dinars in state aid, which will also further increase inflation. You cannot improve the situation with one measure and spoil it with another, that is, deal with both fire and water. In Serbia, inflation is very high, but the president never mentions it, because it is one of the biggest problems of our country,” Kovačević notes.

The president of the Consumers’ Association of Ektefifa, Dejan Gavrilović, agrees with Kovačević that the selection of products that Vučić brought in the basket as representatives of the discount is, to say the least, questionable, because, as he says, these are relatively unknown brands.

He reminds that, although there was talk of the Minister of Trade Tomislav Momirović talking to larger retail chains on this topic, most of the products to which the discount applies can only be found in DIS markets.

“These are mostly not products that can be bought in Idea, Maxi or Lidl… I am not sure how much this action will contribute to reducing prices. They have already started to fall, but not because of the state’s moves, but because the purchasing power of citizens, i.e. consumption, fell in the last quarter. Traders feel it, and consequently lower prices,” says Gavrilović.

Our interlocutor points out that it is not certain that the mentioned reductions will have a greater effect on other manufacturers, although there is room for this, as the margins for some go up to 43 percent.

“Still, if it does happen, it’s pretty sure it’s not because of the cheapening of “Dobro” brand parisian or unknown dish detergent. These are products that are consumed only by those who have to, as evidenced by numerous comments on social networks. From the promise that prosperity will reign in the country, that the Serbian economy will be the first in Europe, an economic tiger, a flying car factory, a silicon valley… we have come to look forward to a cheaper Pariser”, concludes the president of Ektefera.

On the other hand, Vesna Perinčić from the Republic of Consumers’ Union emphasizes that the presented state measures should be welcomed, but that the best way to level prices on the market is healthy competition.

“Traders most effectively change their market behavior due to competitive pressure. Competition as a regulatory factor is not sufficiently developed in our country. An obvious example of this is the recognition of the governor of the National Bank, Jorgovanka Tabaković, that five retail chains dictate market conditions. This clearly indicates to us that the so-called agreement economy is in force here, and that there is no developed market competition. We would deal with inflation much more efficiently if the situation were the opposite. This is how we have abuse of a dominant position, restrictive agreements, and as a final result, a bad position for consumers due to the high prices of products and services, as well as their often unsatisfactory quality,” emphasizes Perinčić.

Danas’ interlocutor points out that it is clear that the inflationary expectations of traders are also incorporated into the prices, that is, that we have projected prices, for which there is certainly a possibility of lowering trade margins.

“Margins for food products are on average about 20 percent. The aforementioned reductions should certainly be welcomed, and how it will turn out in practice remains to be seen. Also, let’s hope that retailers will voluntarily lower prices for products that are not covered by these measures, and which are greatly inflated,” concludes Perinčić.

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