Inflation rises to 9.04% in April amid Iran war fallout
Food inflation edged up to 8.39% in April from 8.24% in March. Meanwhile, non-food inflation rose more sharply to 9.57%, compared to 9.09% in the previous month.
Highlights
- Non-food inflation climbed to 9.57%, while food inflation rose to 8.39%
- Rising fuel, import and transport costs adding fresh pressure on prices
- Ongoing Middle East tensions contributing to global price volatility
- Low-income households remain the hardest hit
Inflation surged to 9.04% in April, driven by rising costs of both food and non-food items amid oil shocks stemming from the US-Israeli war on Iran.
The rate was 8.71% in March, according to the latest data released by the Bangladesh Bureau of Statistics (BBS) today (6 May). In April last year, inflation was 9.17%.
Non-food inflation increased significantly to 9.57% and food inflation reached 8.39% in April, with food prices hitting urban consumers harder than those in villages. Rural households spent more on non-food items compared to those in urban areas.
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Overall, inflationary pressures were more intense in rural areas than in towns.
Zahid Hussain, former lead economist at the World Bank Dhaka Office, said the impact of the war in the Middle East has already started affecting inflation in Bangladesh.
According to him, inflation increased in both food and non-food sectors, but the rise in non-food inflation was the sharpest, driven mainly by fuel and transport costs.
He explained that higher transport costs were reflected in the market very quickly, even before any official increase in fuel prices. As a result, inflationary pressure in the transport sector appeared earlier.
On the other hand, since government-administered fuel prices are used in official statistics, the actual impact has not yet been fully reflected in the Consumer Price Index (CPI).
"Part of the real inflation has still not appeared in official statistics because of delayed price adjustments, which may be described as 'repressed inflation'," Zahid Hussain said.
That means consumers are already paying higher prices than what is fully reflected in the official data.
"April's nearly 9% inflation rate does not fully capture the real picture, as the delayed price adjustments are likely to be reflected more clearly in the coming months, especially in May data," he added.
Zahid Hussain observed similar trends in both urban and rural areas, where higher transport costs were the main source of inflation, followed by the impact of fuel prices.
He said the main cause of the rising trend in inflation was soaring global commodity prices.
Not only fuel, but the prices of almost all imported goods have increased due to higher shipping costs, rising insurance premiums and global supply disruptions.
As a result, higher production and supply chain costs have accelerated inflation further.
Wage growth trails behind inflation
According to BBS data, the national wage growth rate increased to 8.16% in April from 8.09% in March.
Although wages increased, they remained below the inflation rate for the 50th consecutive month.
Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development, said the Middle East-centred conflict is affecting inflation in Bangladesh.
"At the same time, the country's production sector has not yet fully regained momentum."
Instead, he explained, higher production costs, transport expenses and import costs have put pressure on the supply system, with increased fuel prices intensifying the pressure.
Mujeri warned high inflation might continue in the coming months as the current economic trend was not favourable for reducing inflation.
According to him, global markets remain unstable, making a quick fall in inflation unlikely.
Natural disasters, especially possible floods, could also disrupt agricultural production and create supply shortages, he added.
The pressure is more intense on low-income people, as wage growth remains below inflation, reducing their real income and purchasing power.
In this context, Mujeri stressed the need to strengthen social safety net programmes, increase food and cash assistance, create jobs, raise investment and reopen closed factories.
He also called for ensuring food security for poor people in the budget.
