Gambia's consumer price drops

Latest Figures released by the Gambia Bureau of Statistics point to a contraction in prices of domestic food and services as depicted by the national consumer price basket.

Consumer Price Inflation for the month of August 2009 contracted by 110 basis points from 4.1 per cent at the end of July 2009 to 3 per cent at the end of August.

The national price pointer peaked at the end of December 2008 and began the year at 7per cent. The index then took a nose dive; dropping to 6.3 per cent at the end of April 2009 and dropping further to 5.9 per cent at the end of May 2009 to close June 2009 at 5.4 per cent.

Incidentally, the decline was spurred by massive drops in the food components of the basket. Food prices dropped from 6.89 per cent at the end of August 2008 to 2.79 per cent at the end of August 2009.

On a month-on-month (m/m) basis, food prices shrank from 1.84 per cent at the end of July 2009 to 0.34 per cent at the end of August 2009. Nonfood prices increased in a y/y basis but reduced on a m/m basis.

The Non-food component of the basket was up by 3.18 per cent at the end of August 2009; comparing unfavourably with an increase of 2.62 per cent at the end of August last year. On a m/m basis, non-food prices scaled down by 0.7 per cent at the end of August 2009 which compares well with a rather high increase of 0.075 per cent at the end of July 2009.

The Gambia’s economy boasts of one of the lowest inflation rates in Anglophone West Africa. The current rate of 3 per cent compares favourably with a rate of 5 per cent in Liberia and 4.5 per cent in Sierra Leone; with CPI’s for Ghana and Nigeria at 11.1per cent and 19.65 per cent respectively.

OUTLOOK: CPI to Rise…

So far, the declines in domestic prices has been largely attributable to the pass through effect a gradual declines in commodity prices on the international stage, coupled with good fiscal discipline by the central bank of the Gambia.However, we do not see the national price pointer pointing southwards in the coming months.

The commencement of the planting season in September 2009 will lead to scanty shortages in locally cultivated foodstuffs and trigger increases in food prices. The season is also likely to see a surge in imports of food stuffs and a growth in the import bill. Also, the start of the tourist season would also contribute significantly to CPI’s inability to remain pointed downwards in the coming months.

The tourist season will spur a demand for goods and services and impact negatively on both the food and non food components of the basket; particularly, the hotels and restaurants item which has taken a downturn since April 2009. We also expect the CPI to be affected by remittances as consumption expenditure inflates during the
festive seasons. We remain bearish about September’s CPI and expect it to inch upwards; paving the way for a gradual ascendancy of the national price pointer in the coming months.