Country Report Comoros March 2011

Outlook for 2011-12: Inflation

Comoros's membership of the Franc Zone will continue to have a restraining effect on inflation, as it limits the government's ability to print money and hence curtails the growth of the money supply. The IMF estimates that inflation moderated to 2.7% in 2010 despite higher oil prices and an increase in imported inflation caused by a weaker euro-to which the Comorian franc is pegged. This was probably driven by the 10% decline in international prices for the staple food, rice, and by the government's fuel subsidy, which would have partly offset the effect of higher oil prices. In 2011 inflation is forecast to increase to 3.5% as oil prices continue to rise (and pressure to balance the budget limits further increases in the fuel subsidy), rice prices increase marginally and the euro continues to depreciate. In 2012 inflation is forecast to moderate to 2.5% as international oil and rice prices decline by 8.6% and 4.5% respectively.

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