Methodological approaches to recording certain types of services in the Consumer Price Index in Belarus Ekaterina Grikhanova, National Statistical Committee of the Republic of Belarus Meeting of the Group of Experts on Consumer Price Indices Geneva, May 26-28, 2014

INTRODUCTION Consumer Price Index in Belarus: has been estimated since 1991 follows national concept covers 450 items (more than monthly quotations) is estimated using the COICOP classification is estimated using the weights derived from the annual Household Budget Survey (additional sources are used as well) – the weights are updated annually is estimated using the arithmetic Young formula at higher level of aggregation Improvements made for the last two years use of the geometric average at elementary level for the calculation of average prices implementation of electronic tablets for price collection creation of the new software for the whole process of CPI estimation starting with price collection to the processing the data at the national level new items in the CPI basket

THE DISCUSSIBLE ITEMS IN THE BELORUSSIAN CPI Cold water supply and sewerage Hot water supply Electricity Central heating Population is billed by the differentiated tariffs The price per 1m 2 (1m 3 ) or the tariff per 1 unit of heat?

CENTRAL HEATING AND HOT WATER SUPPLY How the population is billed: tariff per 1 Gcalorie of heating energy × average amount of heating energy consumed per 1m 2 of apartment × Total apartment square (m 2 ) Central heating tariff per 1 Gcalorie of heating energy average amount of heating energy per 1m 3 of hot water consumed Total amount of hot water consumed (m 3 ) × × Hot water supply quantity Price for heating of 1m 2 of apartment (1m 3 of water)

CENTRAL HEATING AND HOT WATER SUPPLY cont. tariff per 1 Gcalorie of heating energy average amount of heating energy consumed per 1m 2 of apartment Price for heating of 1m 2 of apartment (1m 3 of hot water): (is taken by the NSO of Belarus into CPI estimation) is regulated by the government, centrally fixed is increased only by regulation of the Council of Ministers is increased usually 2-3 times a year there is only one monopolist supplier of heating energy population can't influence the amount of the heat to be consumed population just pays for the amount of heat placed in the bill

CENTRAL HEATING: Belstat`s approach Price for heating of 1m 2 of apartment (1m 3 of hot water): (is taken by the NSO of Belarus into CPI estimation) As the consumption of the heating energy fluctuates monthly depending on the outside temperature and other factors, the following methodology was chosen: to keep the average amount of consumed heat constant for the whole heating season (October-May) to make an adjustment using the actual heating consumption data for the whole heating season in the index for May

THE DISSCUSSIBLE ISSUES The arguments of the opponents of Belstat`s methodology : it should be only the tariff per 1 Gcalorie taken in the measurement for the central heating index in the CPI Belstat`s approach overestimates inflation the average consumption of heat is the quantitative factor which reflects the outside temperature and shouldn't be included in inflation estimation the consumed service for the population is the heating of 1 m 2 of the apartment the price for the heating of 1 m 2 of the apartment should be taken into CPI estimation as the measure of this service this is the price which population actually pays for the service in their bills Belstat`s point of view:

ELECTRICITY AND COLD WATER SUPPLY the tariffs were recently divided according to the amount of consumption of the particular service there is the social tariff for the consumption within the stated norm and the higher tariff for the consumption above the norm the tariffs for electricity are centrally administered and are the same for the whole territory of the country municipal authorities settle tariffs for the cold water and sewerage – the tariffs above the stated norm differ in the regions of the country

COLD WATER AND SEWERAGE Social tariff within 4.3 m 3 Tariff for the consumption above 4.3 m 3 Average monthly consumption of cold water per resident of cold water per resident of the apartment Average weighted price per resident of the apartment 4.3 > 4.3

ELECTRICITY social tariff × relative share of electricity consumed within the social norm (<150 KWh) higher tariff × relative share of electricity consumed above the social norm (>150 KWh) + Average weighted tariff for electricity

QUESTION In the case when the average percent of the cold water and electricity consumed above the social norm is relatively small should it be taken into the measurement of inflation? In 2013 about 17% of the purchased cold water were paid with a higher tariff The average amount of the excess consumption of water per resident of the apartment varies from 0.2 m 3 to 1.5 m 3 in different regions In 2013 about 84% of electricity consumption related to the social norm, and about 16% - above the norm

CONCLUSION Central heating, hot water supply the price for heating of 1 m 2 of apartment (1 m 3 of water) should be taken as the measurement of these services in the CPI instead of the tariff per 1 Gcalorie among 3 possible ways of measurement of the heating of 1m 2 of apartment and 1 m 3 of water was chosen the method of making the adjustment for heat consumption figures twice a year Electricity, cold water&sewerage Belstat takes into the measurement all the existing tariffs (social and higher) treating them according to the relative share of these services paid by each tariff all the existing tariffs applied to the whole population should be taken into the measurement, even if the share of population who exceeds the social norms is relatively small

13 Thank you for your attention!