Bank of Guyana Raised Inflation Expectations

• The Guyanese Ministry of Finance in its Mid-Year Report has revised its full-year inflation estimate up from 4.1% to 5.8%. This represents an increase in expected inflation of 41% from the previous report. In fact, this 5.8% full-year inflation rate is even higher than last year’s inflation rate of 5.7%.
• Although the inflation expectation is now higher, notably the government in its report pointed out that while a 4.9% increase in CPI has been recorded at the end of June, this is lower than the 5.6% increase that was documented at the end of the half-year 2021.
• Although the June rate was lower than last year’s, the increase in expectations was “underpinned by high food and energy prices, with the former increasing by 8.1% and contributing 3.6 percentage points to the inflation rate.” The main drivers in the food category that pushed up the figure were meat, fish and eggs, vegetables and vegetable products as well as cereals and cereal products.
• Consumers are also facing higher energy costs. The Finance Ministry noted that major contributors were operation and personal transport which rose by 27.1%, as well as fuel and power which increased by 9%.
• Notably, the Government responded with a series of measures to ease the burden of growing commodity prices on citizens when it announced the reduction of excise tax on petroleum from 20% to 10% which was further reduced from 10% to zero.
• Additionally, the administration noted that in this year’s Budget it “removed VAT on cement to lower the cost of construction, and announced the reduction of the final tax applied on miners’ incomes from 3.5% to 2.5%, and the removal of the 10% tributers tax.”

(Source: Kaieteur News)