Country Report The Gambia January 2011

Outlook for 2011-12: Inflation

Inflation increased to an estimated average of 5.1% in 2010, partly because domestic fuel prices were increased for the first time in two years to align them more closely with international oil prices. Over the forecast period food inflation is expected to moderate as domestic food production stays strong and international rice prices decline. International oil prices are forecast to stay stable, so further increases in domestic fuel prices will not be necessary. On the other hand, imported inflation will rise as the dalasi depreciates slightly, and wage increases in the civil service will boost domestic demand, putting some pressure on prices. Overall, the effects of weaker food price inflation will dominate-food comprises 55% of the consumer price index-and inflation is forecast to fall to 4.7% in 2011 and 4.5% in 2012. Since food production is mostly rain-fed, inflation could rise sharply if the rains were to fail.

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