Shortages triggered food cost spike in 2016 – report

The increase in food prices experienced last year is expected to persist in 2017.

Last year, the domestic basket of food cost increased by 4.2 per cent, reflecting mainly an increase in the prices of vegetables, condiments and spices, and fruit products.

Table showing the Consumer Price Index for food prices across three consecutive years

The increases were registered as 19.5 per cent, 18.3 per cent and 12.1 per cent respectively, according to Bank of Guyana’s Annual Report 2016.

According to the document, the spike in food cost was triggered by agricultural shortages from adverse weather conditions. The rise in food prices contributed to the increase in the inflation rate, which was recorded at 1.4 per cent at the end of 2016.

Additionally, there was a marginal increase in the price index of housing by 0.02 per cent due to the rise in fuel and power by 0.2 per cent.

On the other hand, the price indexes of clothing, footwear, repairs, furniture, transport and communications as well as the services of education and miscellaneous goods fell by 3.1 per cent, 2.4 per cent, 0.6 per cent, 0.4 per cent, 0.5 per cent and 0.003 per cent respectively.

The report noted that the transportation category experienced a smaller decline in personal transport of 4.7 per cent relative to a decline of 10.3 per cent at end of the same period in the previous year.

Nonetheless, the report said the economy is projected to grow by 3.8 per cent in 2017.

“This forecast is on account of growth in the mining and quarrying sector by 2.7 per cent as a result of a projected expansion in gold declarations by 1.7 per cent. The agriculture sector (including sugar processing and rice milling) is expected to rebound with 2.5 per cent growth as a result of estimated increases in output of rice and other crops by 10.4 per cent and 4.4 per cent respectively. The services sector is expected to grow by 3.0 per cent due to greater activities in financial and insurance, transportation and storage and wholesale and retail trade by 5.8 per cent, 3.9 per cent and 2.7 per cent respectively. The construction industry is expected to grow by 13.5 per cent,” the document stated.

Consequently, the inflation rate is forecasted at 2.5 per cent from moderate increases in food and fuel prices.

According to the Monthly Economic Bulletin report prepared by the Economic Policy Analysis Unit (EPAU) of the Finance Ministry’s Office of the Budget, inflation in Guyana has tracked inflation in the United States, so rising US inflation may put upward pressure on prices in Guyana, partly as a result of rising prices for US imports.