Inflation falls for 5th month in January

Inflation in Bangladesh declined for the fifth consecutive month in January driven by a fall in food prices, in line with global trends, official figures showed yesterday. 

The Consumer Price Index (CPI) rose 8.57 per cent last month, a decrease of 14 basis points from 8.71 per cent in December, according to data from the Bangladesh Bureau of Statistics (BBS).

January's inflation figure was the lowest since August when consumer prices surged to a 10-year high of 9.52 per cent.

Prof Shamsul Alam, state minister for planning, credited the supply-side improvement for the drop in inflation.

"The supply of farm produce has gone up while the production in the manufacturing sector has improved. As a result, prices are falling," he told reporters at the planning ministry. 

He, however, admitted that the latest hike in the price of gas and electricity might have an impact on inflation in the coming months.  

The government increased the electricity price by 5 per cent at the retail level on January 31, the second hike in 19 days as it steadily retracts subsidies in the power sector.

On January 18, it raised the retail price of gas by 14.5 per cent to 178.9 per cent for industries, power plants and commercial establishments, which together account for 78 per cent of gas use.

BBS data showed that inflation averaged 7.92 per cent in the February-January period.

The government has projected that inflation would stand at 7.5 per cent in the current fiscal year, which ends in June. 

But the International Monetary Fund (IMF) has said the average headline inflation in FY23 is expected to increase to 8.9 per cent in Bangladesh, driven by rising domestic food and fuel prices and the pass-through of large depreciation of the taka.

The local currency has lost its value by about 25 per cent against the US dollar in the past one year owing to the shortage of the US currency.

In January, food inflation declined to 7.76 per cent from 7.91 per cent in the previous month.

Bangladesh is not the only country where food price inflation remains high.

According to the World Bank, information between September to December 2022 shows high inflation in almost all low-income and middle-income countries: 83.3 per cent of low-income countries, 90.5 per cent of lower-middle-income countries, and 91 per cent of upper-middle-income countries have seen inflation levels of more than 5 per cent, with many experiencing double-digit inflation.

In a writeup, Pierre-Olivier Gourinchas, economic counsellor and the director of research of the IMF, said global financial conditions have improved as inflation pressures started to abate.

Global inflation is expected to decline this year but even by 2024, projected average annual headline and core inflation will still be above pre-pandemic levels in more than 80 per cent of countries.

"Inflation could remain stubbornly high amid continued labour-market tightness and growing wage pressures, requiring tighter monetary policies and a resulting sharper slowdown in activity," he said.

Non-food inflation dropped 12 basis points to 9.84 per cent last month from 9.96 per cent in December, according to the BBS.