Higher energy and food prices, combined with the continuation of higher government spending, contributed to a pick-up in the pace of price rises in 2010. Recent data have revealed that food prices have spiked, probably because of the negative impact of the regional drought, as well as flooding in 2010, which damaged crops. The resurgence of inflationary pressures in the final months of 2010 helped to push annual average inflation up to 5.7%. A surge in food and energy prices occurred in the first half of 2011; however, we expect prices for both these commodity groups to ease moderately through the second half of 2011. Supporting this, consumer price inflation appears to have peaked in February 2011 at 9.3% year on year and fell only gradually in the following two months. Over the forecast period, slower economic growth, and weaker domestic demand and money supply growth than in the boom years, will help to limit inflationary pressures. However, large inflows of oil-related foreign exchange and a loose fiscal policy will continue to exert substantial upward pressure on prices throughout 2011-15, preventing more rapid disinflation. Export revenue will be partly sterilised through the use of the offshore oil fund, although transfers from the fund to the state budget will remain high.