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Slovenia Business Week no. 07/2005: Inflation Hits All-Time Low

The Statistics Office said the consumer price index fell 0.6 percent on the month, pushing the annual rate to 2.2 percent

Inflation in Slovenia slowed further in January to hit an all-time low and to move close to euro zone-compatible levels. The Statistics Office said the consumer price index fell 0.6 percent on the month, pushing the annual rate to 2.2 percent.

The office said in its preliminary figures on Wednesday, 9 February the fall in the annual inflation was due to a drop in clothes and footwear prices as a result of winter sales. An easing of fuel prices also contributed to the monthly deflation.

An economist advising the government has said that the government must capitalise on the slowing in inflation in gearing up for membership of the euro zone.

Pointing out that the current annual inflation is close to what Slovenia must reach so that it can adopt the euro, Joze P. Damijan said the key now was to "limit the growth of administered prices".

Damijan, a member of the Strategic Council for Economic Development, a body advising the government, believes Slovenia should be able to fulfil the Maastricht criterion on inflation with a combination of steady fuel prices and the capping of administered prices.

"If we continue down the current path, annual inflation should stand at 2.2 percent at the end of the year, which would be close to Maastricht criteria levels," Damijan told STA.

Inflation has until now the biggest obstacle facing the country in its bid to adopt the euro at the beginning of 2007.

According to the Statistics Office, which made slight changes to the consumer price index last month, clothing prices were 10.3 percent lower in January and footwear prices dropped by 4.3 percent.

Moreover, fuel prices fell by around 1 percent, while transport (-0.6%) and house prices (-0.3%) were also down last month.

The deflation could not be offset even by a 0.9 percent jump in the price of food and non-alcoholic beverages and a 0.4 percent rise in the price of services.

Source: Slovene Press Agency STA

Author: STA