According to the World Bank’s (WB) Food Security update of May 4, 2023, Bhutan recorded the highest food inflation in July 2022, which was 5.8 %. This was one of the highest food inflation levels in recent times. From the 47 lower middle-income countries, the food inflation rate of Bhutan never went up at the level of a price increase of 30% or higher.
The update also shows that the food inflation rate was less than 2% in February 2023. Bhutan saw the second highest food inflation in August 2022 which was 5.2%. The highest recorded food inflation was after it climbed up to 5.1% in June from 3.5% in May 2022. According to Melanie Simone Trost, World Bank Economist, the figures for the months of March and April could not be obtained.
The WB has sourced information from the Bhutan Development Update (BDU) from October 2022, which includes a section on inflation with data up to June 2022. According to the Economist, the BDU highlights that food inflation declined from 14.7 percent in FY 20/21 (July 2020 to June 2021) to 4.7 percent in FY21/22 (July 2021 to June 2022) due to favorable base effects, and lower domestic food inflation.
While imported food inflation remained elevated at 7 percent in FY21/22, in line with price movements in India (Bhutan’s inflation rate co-moves with that of India with a time lag since about 80 percent of Bhutan’s imports come from India and the BTN is pegged to the INR), domestic food inflation eased to 2.1 percent year-on-year (y-o-y) in FY21/22, below the 5-year pre-COVID average of 5.3 percent from FY14/15 to FY18/19. The lower domestic food prices partly reflect government measures to boost domestic food production.
According to the WB report, the food inflation rate dropped at a price increase between 5 and 30% starting from September 2022. It was 4.3% in September 2022, which further dropped to 4.3% in October 2022.
In October 2022, the food inflation rate dropped at price between 2 and 5%. The month recorded 2.9% and 2.2% in November 2022.
Though the inflation rate dropped further, the months of December 2022 and January 2023 remained constant at 1.5%. With a slight rise, the inflation rate in February 2023 was 1.9%.
Since the last update on April 20, 2023, the agricultural, cereal, and export price indices closed 8%, 9%, and 11% lower, respectively.
Domestic food price inflation remains high in almost all low, middle, and high-income countries. The 2023 Global Report on Food Crises (GRFC) indicates that 258 million people in 58 countries or territories for which consensus-based evidence is available faced crisis or worse levels of acute food insecurity (Integrated Food Security Phase Classification/Cadre Harmonisé (IPC/CH) Phase 3+ or equivalent) in 2022. Trade policies are a major source of risk for global food price stability according to the food security report.
The International Monetary Fund (IMF) is the core data source for food inflation, supplemented by Trading Economics. Real food inflation is calculated as the difference between food inflation and overall inflation. A traffic light approach was adopted to show the severity of nominal food inflation.
Domestic food price inflation (measured as year-on-year change in the food component of a country’s Consumer Price Index (CPI)) remains high. Information from the latest month between January 2023 and April 2023 for which food price inflation data are available shows high inflation in almost all low and middle-income countries, with inflation greater than 5 percent in 64.7 percent of low-income countries, 83.7 percent of lower-middle-income countries, and 89.0 percent of upper-middle-income countries with many experiencing double-digit inflation.
Sangay Rabten from Thimphu
