Inflation edges down, close to govt target Inflation dropped 2.92 percentage points to 7.70 percent in fiscal 2012-13 thanks to a fall in commodity prices and weak domestic demand. The figure narrowly compromised the government’s aim of containing inflation within 7.5 percent in fiscal 2012-13. In fiscal 2011-12, inflation stood at 10.62 percent on average. Given the looming parliamentary elections, economists are, however, tipping inflation to creep up this fiscal year. “We have to keep a close watch on inflation, especially in view of the anticipated wage increases in both the public and private sectors in the months ahead,” Hassan Zaman, chief economist of Bangladesh Bank, told The Daily Star. Although the finance minister did not announce any dearness allowance for government staff in the budget for fiscal 2013-14, two increments are expected, which are most likely to take effect on July 1. Besides, a separate, improved pay scale is on way for the state-owned banks, as intimated by the finance minister in his budget speech. “As a pre-election policy, government spending may go up to woo in voters, which would create more demand and therefore push up inflation,” Zahid Hussain, lead economist of the World Bank, said. The parliamentary election is due to take place at the end of this year or early next year, meaning the concerned ministries are under pressure to quickly release money for building and repairing small roads, culverts and electric poles, which may cause the money supply to increase, he said. “If crops get damaged due to natural disaster and political unrest starts again, the inflation will escalate.” “In short, there are many internal risks to inflation rising, but the downward trend in international commodity prices bodes well for Bangladesh. The same reason contributed to the decrease in inflation last fiscal year,” he added. During fiscal 2012-13, food and other commodity prices did rise in the international market and fuel price remained stable. The unfavorable investment climate which lent itself to weak domestic demand and central bank’s cautious monetary policy, too, contributed to bringing inflation down, the WB economist added. Meanwhile, inflation in June stood at 7.97 percent, up from May’s 7.86 percent. Food inflation in June was 8.53 percent and non-food 6.99 percent, both higher than May’s 8.40 percent and 6.93 percent respectively. From
Posted on: Mon, 08 Jul 2013 03:35:03 +0000
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