Annual deflation rate in July 2020, measured by consumers’ prices, was -0.5%, while inflation measured by harmonized consumer price index was -1.6%, latest data of the Central Bank shows.
In economic theory, negative inflation is called deflation and is described as process in which currency becomes more valuable. Montenegro does not issue euro, but only uses it as its currency.
By definition, deflation is favorable for the owners of money whose property is becoming more and more valuable, but is lowering consumption at the same time, which can lead to economic difficulties.
In general, deflation is a decrease in the general price level of goods and services.
According to CB, consumer prices have recorded y 0.3% fall in July 2020, with the biggest fall recorded in the clothes and shoes category (-3.6%).
Increase in prices has been recorded in transport (1.5%) and alcoholic drinks and tobacco (0.1%).
“Prices have remained unchanged in the following categories: housing, water, electricity, gas and other fuels, furniture, equipment for households and routine maintenance of apartments, health, education, and other goods and services”, August Bulletin of the CB states.
The interesting thing is that banks and the economy were not expecting negative inflation.
In the Eurozone, inflation reached 0.3% in June, when many restrictive measures imposed due to coronavirus were lifted.
In the same period last year, consumer price increase in the Euro area was 1.3% at annual level. In June 2020 in the entire EU, inflation accelerated by 0.8%.
Deflation has been recorded in Cyprus, (-2.2%), Greece (-1.9%) and Estonia (-1.6%), while highest rates were registered in Poland (3.8%), the Czech Republic (3.4%) and Hungary (2.9%).
