Inflation drops to 8.71% in March

March brought an easing of inflation in Bangladesh, with the rate falling to 8.71% from February's 10-month high of 9.13%, according to the Bangladesh Bureau of Statistics (BBS) data released on Sunday (5 April).

The overall decline was driven by a sharp drop in food inflation to 8.24% from 9.30% in February. The drop came in stark contrast to the Food and Agriculture Organization (FAO) warning on 3 April that global food prices rose in March to their highest level since September last year.

The FAO cautioned that prices could rise further if the Middle East conflict – which has already pushed up energy costs – continues.

Infograph: TBS

In March, the average wage index increased slightly to 8.09%, marking gains in farm, factories and services, also breaking a 50-month declining streak in workers' real incomes since February 2022.

Dr Fahmida Khatun, Executive Director of the Centre for Policy Dialogue, said, "In reality, the drop in inflation appears somewhat 'disjointed,' meaning it does not fully reflect ground realities."

"If the data does not match people's lived experiences, questions will naturally arise," she said.

However, Zahid Hussain, former lead economist at the World Bank Dhaka office, does not find the March inflation figure unusual.

He explained that a decline in inflation does not mean prices are falling, rather, the rate of increase has slowed. "Prices are still rising, but at a slower pace."

He noted that although the war situation emerged toward the end of February, its full impact had not yet been reflected in March inflation data.

"Prices of fuel, fertiliser, and other inputs are rising in international markets, but these take time to transmit domestically," he said.

Explaining March's decline in price index, the economist also pointed out that domestic adjustments in gas, electricity, and petroleum prices were not made in March, while LPG prices were adjusted only in early April.

He also noted that in countries like India, Pakistan, and the United States, fuel prices are adjusted more frequently, so the impact of global shocks is felt more quickly. In Bangladesh, the monthly adjustment system delays this impact.

However, he noted that in many cases fuel is being sold at 50% to 100% higher prices in informal markets outside fuel stations, but these prices are not captured in the Consumer Price Index, meaning the real pressure is not fully reflected in official statistics.

The impact of higher costs of transportation, imports, shipping, and insurance premiums is likely to become visible from April-May, he warned.

According to BBS data, the food price index dropped more in rural areas than urban areas, which saw steeper decline in non-food indices in March.