Sri Lanka national inflation hits 7.6-pct in Jan 2020

PRICE SPIKE: Sri Lanka’s National Consumer Price Index is showing the highest gains since 2017, when the island was recovering from 2015/2016 currency collapse. Base effects may amplify 12-month changes.

ECONOMYNEXT – Sri Lanka’s nation-wide inflation measured by the National Consumer Price Index, speeded up to 7.6 percent in the 12-month to January 2020, from 6.2 percent in December 2019, the state statistics office said.

The NCPI price index gained 1.5 percent during January 2020, rising to 137 points from 135 points a month earlier. The index also gained 1.6 percent in December.

The rise to 7.6 percent is the highest seen since November 2017, when the index grew 8.4 percent. The index showed 8 percent inflation for several months in 2017, as the economy recovered from a currency collapse in 2015/2016, which was followed by an output shock.

In 2018, Sri Lanka is revering from a currency collapse in 2018.

Analysts have said that despite a currency collapse, inflation will remain muted in the first period after the collapse due to liquidity shortages and a credit collapse.

Prices will tend to go up, when the credit system recovers from the currency collapse, and demand picks up.

In December and January Sri Lanka’s vegetable prices doubled in some cases, partly driven by lean production ahead of the main cultivation season as well as looser monetary conditions compared to 2018, when liquidity was tight. (Colombo/Feb24/2020)