Higher costs on goods are here to stay, SAIT

Market analysts do not see any improvement in the cost of goods in the next period and until the first half of 2022. In fact, Cyprus is one of the most affected countries compared to other countries, due to its strong dependence on imports of products and raw materials, 95% of which arrive in Cyprus by sea. Thus, increases in containerized freight rates had an early impact on product prices, mainly in the construction sector.

Considering that prices will increase on average by 15-20%, this means that consumers either have to increase their income or reduce their spending by 15-20%.

This is an imported problem, the regulation of which does not depend on Cyprus, according to the director of economic development and economy Antonis Fragoudis who confided in “K”. So, since this is an import issue, little can be done to limit the impact on the market. However, he points out, some reductions in VAT on products or perhaps some actions included in the Stimulus and Sustainability Fund could be taken on a budgetary basis.

Cause and effects

So what caused the price increases? The source was the rising cost of energy and the chain effects on transport costs, which were already burdened by the balance of supply and demand during the pandemic. To all this is added climate change with its effects on the production of raw materials. It is therefore a mixture of unfavorable developments which inevitably leads to a crisis in the world market.

“The increases have occurred against the backdrop of the pandemic,” says economist Andreas Hatzis. He estimates that the upward trend will continue for next year and continue into early 2022. And it will be a chain effect – inflationary trends in the market will negatively affect the purchasing power of consumers, with all that. that this implies in economic, social and working conditions. “Considering that prices will increase on average by 15-20%, that means consumers either have to increase their income or reduce their spending by 15-20%. “It will inevitably have an impact on the market. . “

Container prices are four times higher

Under Secretary for Navigation Vassilis Dimitriadis spoke of the soaring container prices, explaining that the phenomenon was initially due to blockages, causing huge demand for products and reducing the supply of containers, which pushed prices up to new heights.
It is indicative that shipping a container costs about $ 15,000 today, compared to about $ 2.5,000 just a year ago. The phenomenon will normalize but it will take some time, he noted.

“We will be entering a process of supply and demand normalization but I wouldn’t say this will be fixed overnight, it will take some time. Market forces will gradually normalize as demand decreases. and that the supply of containers increases. ” At the shipping level, an effort is being made to reduce transportation costs, however, he says, even if there is a drop in container prices, they may not return to pre-Covid levels.

About Natalee Broderick

Natalee Broderick

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