Analysts forecast 15.4% inflation rate
Analysts at Financial Derivatives Limited (FDC) Limited have forecasted 15.4 per cent inflation rate.
The National Bureau of Statistic (NBS) is likely to release its December inflation data next week.
According to analysts “Based on our survey and regression model, headline inflation is expected to increase by 0.51 per cent to 15.4per cent in December 2020. This will be the highest level in three years.
“The continued rise in the general price level is driven largely by forex rationing, output and productivity constraints, higher logistics and distribution costs.
“This will be the highest level in 37 months, driven mostly by foreign exchange rationing, output and productivity constraints, higher logistics and distribution costs.”
They expressed that the cheery news is that the rate of increase in the general price level is expected to decelerate. This could imply that the re-opening of the land borders and the harvest of commodities such as tomatoes and onions is beginning to taper pricing pressures.
“Our survey also reveals a decline in the month-on-month inflation to 1.2 per cent (annualized 16.71 per cent) from 1.6 per cent (annualized 21.17per cent) in November.
“Our December survey shows a strong seasonality factor pushing demand especially for festivity-sensitive goods such as rice, turkey, vegetable oil and chicken. Traders and manufacturers took advantage of this to increase commodity prices but not as much as in the previous year.
“This is largely because of weak aggregate demand in 2020 relative to 2019. Consumer disposable income has been negatively affected by the hike in electricity tariffs, general reductions in subsidies and improved tax mobilization. The breakdown of the findings shows a mixed movement in commodity prices.
“While the price of tomatoes, onions and rice declined, items such as palm oil, noodles, chicken and turkey recorded price increases. Hence, food inflation is expected to rise at a slower pace to 18.5 per cent in December.
“The increase in the domestic food basket is in line with the FAO food price index, which rose by 2.2per cent to 107.5 points in December, mainly due to higher cost of dairy and vegetable oils.
“The non-food component of the inflation basket also increased, reflecting the impact of exchange rate devaluation and higher logistics costs.”
