Purchasing power of Nu impacted by rising CPI

The purchasing power of Ngultrum as measured by CPI has dropped by 4.75% in the last year (from December 2022 to December 2023) due to price increase in the economy

The Consumer Price Index (CPI) for the month of December 2023 had increased by 4.99% compared to the same month in 2022, according to the CPI bulletin for December 2023 released by the National Statistical Bureau (NSB) recently.

The CPI bulletin highlights that there were increases in both food and non-food items during this period, with rises of 6.21% and 3.96% respectively.

Notably, the health sector experienced the highest increase at 12.47%, acting as the main driver behind the overall CPI growth. In contrast, the transport sector witnessed a minimal increase of 0.85%.

Except for the communication division which experienced a decrease of 1.06%, all other divisions saw an increase in their annual CPI. The NSB report emphasized that there were notable increases in the indices of food and non-alcoholic beverages, housing and utilities, health, recreation and culture, education, and restaurants and hotels.

The CPI for alcoholic beverages and betel nuts increased by 3.46 percentage points, and the CPI for housing and utilities increased by 3.11 percentage points. The report also shows that the index for health increased by 8.27 percentage points and that of recreation and culture increased by 4.36 percentage points.

Meanwhile, transport saw a huge decrease in the index by 11.74 percentage points from 2022 to 2023.

Examining the month-on-month CPI, in December it was 0.41%, which is an increase from November. The food prices increased by 1.5% and the non-food prices went down by 0.5% in December. The decline, according to NSB, is mainly driven by the decrease in the price of transport by 1.6%. While the price index for food and non-alcoholic beverages increased by 1.54% from November, and alcoholic beverages and betel nuts also showed an increase of 0.49%.

On the other hand, the prices of household goods and services increased by 4.23% from 2022 to 2023. This was a drop of 1.41 percentage points compared to a 5.64 % increase in 2022. There was a lower rate of increase in non-food items by 4.44% compared to a 7.10% increase in 2021.

Among the twelve major divisions, food and alcoholic beverages contributed to more than 45% of the total increase in 2023, followed by transport with about 33% and clothing and footwear with about 13% of the total increase.

In 2022, among the twelve major groups, transport recorded the highest increase with 12.59%, followed by alcoholic beverages and betel nuts, which recorded the lowest increase with 1.16%, while all other divisions recorded an increase except for communication which dropped by 1.46%.

The CPI is a measure of average price changes in the basket of goods and services purchased by households over time. It shows how much, on average, prices of goods and services have increased or decreased from a particular reference period, commonly known as the index reference.

According to the NSB’s report, the purchasing power of Ngultrum as measured by CPI is Nu 60 as of August 2022 compared to December 2012. This means Nu 100 in August 2022 is worth only Nu 60 at December 2012 prices.

The purchasing power of Ngultrum as measured by CPI is Nu 56.4 as of December 2023 compared to December 2012. This means Nu 100 in December 2023 is worth only Nu 56.4 at December 2012 prices.

The purchasing power of Ngultrum as measured by CPI has dropped by 4.75% in the last year (from December 2022 to December 2023) due to price increases in the economy.

Nidup Lhamo from Thimphu