Revised inflation estimate – still unrelated to reality

Sep 08, 2022 Editorial

Kaieteur News – We are glad that the Bank of Guyana (BoG) has revised its earlier inflation numbers (“Mid-year inflation rate surpasses what was predicted for the entire year” -KN September 6). Now the new estimated inflation number by the end of this year has gone from 4.1% to 5.8%, and it is a step that inches forward towards reflecting what Guyanese are living with somehow.

It is one that narrows to a limited degree the gap between what is on paper and official record, and what are the realities of price pressures in the street and as felt in homes. Still, we take the position that the new 5.8% estimate falls short of what is real. We question and take issue with the earlier smaller inflation estimate for the end of 2022, as put out by BoG. Most Guyanese knew that 4.1% had no relationship with reality, and was hugely underestimated, since it just could not be. It could not be when citizens across the length and breadth of this country were living with prices that were not increasing by addition, but were racing away from them, like some out of control multiplication machine. It was that prices existed on steroids, and there was no stopping them, catching up with them, for they just kept increasing.

What put the BoG first 2022 inflation estimate under pressure was that many prices were steeply up, but almost all prices relative to food items were going haywire. Guyanese just couldn’t keep up with the prices of local farm produce, be those greens or vegetables, and so forth. In some instances, the word from struggling and frustrated citizens was that it was more economical to buy foreign stuff that comes in cans and packages in local supermarkets, than what comes out of the ground right here. Local price conditions alone would ratchet up any reasonable inflation estimate, no matter how small the food presence in the basket of goods measured. When consideration is given to what is charged for livestock and other animal products, then there is increased pressure on any inflation projection. Further still, when the price of fish is included in the mix, then the inflation buildup intensifies some more.

The BoG in its report recognises this in noting that the inflation increase is “underpinned by high food and energy prices, with the former increasing by 8.1% and contributing 3.6% to the inflation rate.” We hate to do this, and with respect to the experts at the BoG, something is not adding up with these numbers. We are aware that not every food item goes into the inflation basket of goods. But we know from actual experience to say that high food prices went up by a mere “8.1%” comes across as very much on the low side.

The reality in every municipal market and local supermarket is that food prices have not increased by a few cents, but by many dollars. Greens, tomatoes, ground provisions, and so forth increase in double digit percentages, on occasion by hundreds of dollars at a pop from week to week. There are small price retreats and then there are renewed surges in prices, with almost no product left untouched. It is why we assert that, as a practical matter, one of scarce dollars and cents, the BoG’s 8.1% increase in food prices is too much on the downside. It would be helpful to know what is the weighing/contribution that the BoG gives to food in its inflation calculations.

Furthermore, we have some problems with the revised inflation estimate for 2022.

Again, it is our position that the new 5.8% figure is too conservative and does an injustice to what Guyanese lose ground to in their daily attempts at coping. It could be that the consideration given to food prices in the BoG inflation measurement is too much on the light side. We recognise that food prices are only one of several components (energy, transportation, durables, electronics and more) that go into any inflation calculation, but still have difficulty with the projections, as revised and released. When we consider scarcities leading to possibly more price pressures at yearend, the gap between BoG’s estimate and consumer reality could widen.

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