Country Report Comoros June 2011

The domestic economy: Inflation accelerates again

According to the IMF's post-mission statement, increased food and fuel prices, and the impact of a large aid-financed settlement of wage arrears, led to a "slight" rise in inflation last year. The Fund does not provide detailed data, but claims that the inflation rate "remained below 7%"-presumably at its mid-year spike. In earlier reports it had suggested that the rate had moderated in the second half of the year, and that prices would end the year at around 3.2%.

It is likely that price rises accelerated again in the early part of 2011-Comoros continues to import much of its fuel, and continued instability in the Middle East and North Africa has seen the price of Brent Blend crude oil increase by almost 50% year on year in the first half of the year. Oil prices are forecast to moderate only slightly in the second half of 2011, suggesting that the IMF's revised inflation forecast of 2.8% for this year is overly optimistic. Although Comoros's membership of the Franc Zone will continue to contain inflationary pressures (by limiting the government's ability to print money), supply-side factors are likely to boost inflation to around 3.8% in 2011.

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