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Inflation Projections-The Ministry of Finance anticipates a gradual reduction in inflation, commencing this month, attributing it to improved supply conditions, relief from imported inflationary pressures, and the impact of a high-base effect.
As per the Monthly Economic Update and Outlook for December unveiled on Wednesday, the projected range for inflation in December 2023 is between 27.5-28.5 percent, with a further decline expected to 24-25 percent in January 2024.
Despite administered price hikes, especially in gas rates, the ministry foresees inflation remaining at a moderate level for the remaining months of FY24. Factors contributing to this outlook include stable exchange rates, controlled aggregate demand, improved supply conditions, a moderation in international commodity prices, and a favorable base effect.
The recent reduction in petrol and diesel prices is poised to counter inflationary pressures stemming from previous petrol price increases. This reduction in fuel costs is anticipated to significantly impact the reduction of transportation and manufacturing expenses for the average consumer.
Additionally, efforts by sub-national governments to align public transport and freight tariffs with lower fuel costs are expected to further alleviate inflationary pressures. In the food sector, the Food and Agriculture Organisation’s price index, which tracks widely traded food commodities, maintained an average of 120.4 points in November 2023.
This stability in the index results from slight increases in vegetable oils, dairy products, and sugar, offset by decreases in cereals and meat prices. Notably, the index was 14.4 points (10.7 percent) lower compared to the same period a year earlier.