Inflation overshoots target last fiscal year | The Daily Star
12:00 AM, July 07, 2020 / LAST MODIFIED: 10:16 AM, July 07, 2020

Inflation overshoots target last fiscal year

Inflation ended the just-concluded fiscal year at 5.65 per cent, slightly overshooting the government's target of 5.5 per cent, owing to the dragging supply chain disruption caused by the pandemic-induced shutdown. 

Fiscal 2019-20's weighted-average inflation was also 17 basis points higher than the previous year's 5.48 per cent, showed data from the Bureau of Statistics (BBS) yesterday.

However, this is the third lowest annual inflation recorded by the government in the last decade, budget documents showed. In June, overall inflation rose 50 basis points to 6.02 per cent from 5.52 per cent in the same month a year earlier, driven by the increase in food inflation. 

Food inflation was 6.54 per cent in June, up 1.14 percentage points over the same month in 2019.

Planning Minister MA Mannan, while releasing the data, blamed the floods and the damages caused by the natural calamities for the sudden increase in the general inflation.

"Once the flood situation improves, inflation would come down," he said.

Non-food inflation dropped 49 basis points to 5.22 per cent in the last month of the fiscal year, from 5.71 per cent in June last year.

In rural areas, inflation crept up to 6.02 per cent, which was 5.38 per cent in June last year, up 64 basis points.

Food inflation advanced to 6.47 per cent from 5.58 per cent and non-food inflation increased by 17 basis points to 5.18 per cent, BBS data showed.

Urban inflation was 6.03 per cent last month, 25 basis points higher than in the same month a year earlier.

Food inflation rose sharply to 6.72 per cent from 5.01 per cent in June, while non-food inflation fell significantly to 5.27 per cent from 6.64 per cent.  

The prices of rice, eggs, broiler chicken, vegetables such as potato, eggplants, lady's finger, bitter gourd, tomatoes, carrots, long beans and papayas and spices such as red chillies, ginger and garlic rose in June from May, said the BBS in a press release.

Inflation target for the new fiscal year is 5.4 per cent.

The impact of economic disruptions both on the demand and supply sides is clearly visible in these inflationary trends, said Zahid Hussain, a former lead economist of the World Bank Dhaka office.

The supply chain remained disrupted because of the countrywide shutdown enforced to tame the raging coronavirus even though mobility restrictions were withdrawn on May 31. Cyclone Amphan and floods did not help. On the other hand, Ramadan followed by Eid in June boosted the demand for food.

"These together increased food prices."

However, demand for non-food items, except health care, remained depressed because of weak consumer confidence, income losses and increase in unemployment.

This led to a decrease in non-food inflation in June relative to the previous month as well as June 2019.

Increased food inflation is terrible news for all population groups, but particularly for the poor and the middle-class, Hussain said.

"It is exacerbating their economic distress. The government needs to ensure that the food supply chains remain functional, the large operators in the wholesale and retail food markets do not take advantage of the situation by engaging in price gouging and make it easier for newcomers to compete with existing operators in the food supply chain."

The Bangladesh Bank will need to strengthen inflation surveillance and keep monetary growth in line with price stability as it finalises its monetary programme for fiscal 2019-20, he said.


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