Gambia's consumer inflation remains unchange

The Gambia Bureau of Statistics has released the Consumer Price Inflation (CPI) for the month of February 09 at an unchanged rate of 7 per cent (y/y).

The price pointer was quoted at 7 per cent at the end of January 09. Could the stability in the index indicate a probable downward trend in the coming months given the 2009 Budget’s headline Inflationary target of 5 per cent?

The International Monetary Fund (IMF) projects Inflation for the sub-region to slow to a lesser 3.5 per cent at the end of 2009 from a higher 5.4 per cent at the end of 2008 as the Continent’s index is also estimated to be reversed downwards to 3.4 per cent at the end of 2008 from 5.2 per cent at the end of 2009.

Food prices inched up from 8.81 per cent at the end of Jan 09 to 8.89 per cent at the end of Feb 09 on a y/y basis. This still compares unfavourably with a marginal decline from 8.38 per cent in Jan 08 to 8.33 per cent at the end of Feb 08. On a month-on-month basis, food prices eased down from 0.24 per cent at the end of Jan 09 to 0.13 per cent in Feb 09. The non-food component of the basket also grew by 8.77 per cent at the end of Feb 09 from 8.70 per cent in Jan 09 (y/y).

This was in a sharp contrast with a decline of 1.20 per cent in Feb from 1.32 per cent a year ago. Month-on-month non-food prices shrank from 0.24 per cent in Jan 09 to 0.12 per cent at the end of Feb 09 weighing positively against an inch of 0.50 per cent at the end of Feb 2008. Electricity and housing led the charge in the increase in the non-food component of the national price basket; swelling by 6.8 per cent and 6.4 per cent respectively.

Analysis:
The pulse of the consumer price barometer continues to be dictated by food prices. Though downside risks to the global economic outlook remain unchanged, we expect upside risks to domestic inflationary pressures to subside in the coming months of 2009.

This is on the back of anticipated falling domestic export demand and financing, declining commodity prices and much tighter external financing constrains; especially considering a current budget deficit (D1.3bn) at the end 2008.

Essentially, these factors should result in declines in food prices as re-export trades slow down and imports contract due to falling demand on the local
market. Slowing demand should see drops in the food component
of the consumer price basket. Moreover, contractions in external
(donor) financing should see a surge in domestic borrowings and
reduce money supply. Consequently, the Dalasi’s steady
performance against its major trading counterparts should provide
signification insulation against import costs. In the light of these
factors, we forecast the CPI for the month of March 09 to decline
from its current 7 per cent recorded at the end of January 2009.

Analyst: Richmond Dela Cabral
Email: richmond.cabral@databankgroup.com