The rate may go up if supply disruption continues, economists say
Inflation accelerated to 4-month high in December as food prices soared due to supply chain disruption caused by the prolonged political violence and shutdowns.
Economists say inflation rate might climb up further unless supply conditions improve.
Official data released yesterday showed the overall inflation rose to 7.35% in December, above the previous month’s 7.15% and highest since September. This is also close to the fiscal target of 7.5%.
Food inflation continued to exert pressure, rising to 9% in December from November’s 8.55%. The increase in food prices in December was the fastest in 23 months when it was 10.9%.
“The supply side is a major factor, which is putting pressure on the upward trend of inflation,” said economist Mustfa K Mujeri.
Transport across the country fails to function normally because of the long spell of shutdowns and political unrest, he said, adding food inflation remained consistently high in recent days even in this peak season.
According to the Bangladesh Bureau of Statistics (BBS), overall inflation in rural areas surged 8.63%, up from 8.06% in the previous month, but in urban areas it was 9.89% from 9.67% during the period.
Mujeri said the cost-push inflation may continue to drift up if supply situation does not improve.
However, the non-food inflation dropped slightly to 4.88% from 5.08%.
“Political instability pushed up inflation. Transportation of goods across the country suffered seriously due to the political unrest,” said BBS Director General Golam Mostafa Kamal.
He said food items could not enter into Dhaka from rural areas during the blockades and strikes. The same is the case for non-food items too. “It also fails to reach different parts of the country.”
Over the last two months, the country is going through deadliest political violence, which virtually brought trade, commerce and life to a standstill situation.
More than two hundred people have already died in violence across the country during the opposition agitation, in which public transport carrying passengers and goods were set ablaze and vandalised.
At least 18 people were killed in different parts of the country in clashes during Sunday’s election.
In response to a question, the BBS director general said: “I hope it will not be the case. It should not touch double digits unless there is a serious crisis of transport.”
The central bank in its July-September quarterly report also hinted that supply disruption might lead to inflationary risk.
Source: Dhaka Tribune