Winter vegetables cool down food inflation, but VAT hike, Ramadan could reverse trend: Experts

The decline in food inflation is due to seasonal effects, such as increased vegetable production and supply during the winter, and it could rise in the coming months due to Ramadan and the government's decision to raise the value-added tax (VAT) on certain products and services, experts say.

According to the latest data from the Bangladesh Bureau of Statistics (BBS), food inflation in Bangladesh was recorded at 12.92% in December, down from 13.8% in November.

The slight fall in food prices has also reduced the country's general inflation, which reached 10.89% in December, down from 11.38% in November.

Mohammed Mizanur Rahman, director general of BBS, told TBS, "The prices of winter vegetables have decreased due to seasonal effects in the market, which is noticeable. These items have seen a price decline, and the calculations provided reflect this trend. However, this is specific to a particular month and could change later."

Dr Mustafa K Mujeri, former director general of the Bangladesh Institute of Development Studies (BIDS), told TBS, "I think a seasonal effect is at play here. Due to the winter season, vegetable prices, which were higher earlier, have come down a bit. This has contributed to a reduction in food inflation."

Winter vegetables cool down food inflation to 12.92% in December

"However, it's uncertain how long this downward trend will continue in the coming months. We need to observe whether this is temporary, as we are already seeing an upward trend in rice prices. With Ramadan approaching, the prices of many commodities are also rising," he added.

October's food inflation was the highest since July, when it peaked at 14.10% due to disruptions in supply chains caused by anti-discrimination protests.

Meanwhile, non-food inflation in December was recorded at 9.26%, down from 9.39% in November.

Dr Mujeri further said, "Another factor at play is the recent increase in VAT on many products. VAT has risen from 7% to 16% on various goods and services, which will impact the market in the coming days."