The Financial Express

5.4pc inflation rate likely next fiscal

| Updated: June 05, 2020 09:32:33

5.4pc inflation rate likely next fiscal

The government is likely to keep the average inflation rate within the 5.4 per cent limit in fiscal year 2020-21, officials said on Wednesday.

The inflation target for the next fiscal will be proposed in the upcoming national budget, to be announced on June 11 at the parliament, they said.

In the outgoing fiscal, the government set the 12-month average inflation target at 5.5 per cent as it wanted to keep the Consumer Price Index or CPI in the comfortable zone.

Data from the state-controlled Bangladesh Bureau of Statistics or BBS on Tuesday showed the point-to-point inflation rate in May fell to 5.35 per cent from 5.96 per cent month on month.

The year-on-year average inflation from June through May, however, recorded 5.61 per cent, the BBS data showed.

In the national budget of the current fiscal, the government's target for the 12-month average inflation was 5.5 per cent.

In FY 2019, the 12-month average inflation was recorded at 5.48 per cent, 0.08 percentage points lower than the government's 5.6 per cent target.

The World Bank, in its latest South Asia Economic Focus report, said Bangladesh's inflation rate could go up to 5.7 per cent in FY2020 before rising in the next fiscal.

The global lender said the inflation is projected to remain above Bangladesh Bank's 5.5 per cent target due to expansionary monetary and fiscal policies and higher food prices.

Meanwhile, the government is going to take an expansionary budget expenditure approach in the upcoming fiscal to cushion the impact of coronavirus pandemic on the economy.

Economists and policymakers feel that the inflation in FY2021 would cool off as the coronavirus has resulted in lower private and public consumption, which is expected not to get much momentum in the next fiscal too.

Member of the General Economics Division or GED Prof Shamsul Alam told the FE that the inflationary pressure would be under the limit in FY2021.

He said since the economy has already contracted a little bit and it was facing depressed consumption, the inflationary pressure would not flare up.

Prof Alam said though the agricultural production and supply this season was very good, consumers will be taking cautious approach while spending.

CPD research director Dr KG Moazzem said private consumption has already started to drop.

"Although it is not yet reflected significantly, but the consumers have already started to reduce their daily expenditures. The low expenditure will affect consumption and demand alike. Government consumption is also slower," he told the FE.

CPD research head said, "The people will only spend on very essential services and goods. They will not go for other expenditures amid the COVID-19 pandemic."

Still, he said the government's expansionary policy coupled with borrowing would lead to some broad money growth, which can push up inflation.


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