Average consumer prices rose by 3.4 percent during the first quarter of 2022, according to the most recent data provided by The Central Bank of The Bahamas (CBOB), and the country’s overall spend on fuel increased by more than 30 percent due to volatile global market activity.
Inflation has been projected to rise as high as seven percent this year in The Bahamas, but with the risk of stagflation in the United States, following the Federal Reserve’s 0.75 increase in the federal fund rate to one percent, fears have arisen among economists that prices could surge even higher in the short to medium term. Stagflation is a situation in which the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high.
The Fed has said it expects its benchmark interest rate to increase to 3.4 percent by the end of this year to offset high inflation.
For The Bahamas, with its closest trading partner experiencing an economic tailspin, that means even higher prices in the months to come. The Central Bank reported increases in every major category of the consumer price index.
“Average costs for transport grew by 12.5 percent and for communication, by 11.4 percent, after posting respective reductions in the prior year. Similarly, in contrast to the previous year’s decreases, average prices firmed for housing, water, gas, electricity & other fuels – the most heavily weighted component – by 2.5 percent and for education, by 2.1 percent,” the Central Bank revealed in its Quarterly Economic Review for March.
“In addition, average inflation quickened for clothing & footwear (5.8 percent), alcoholic beverages, tobacco & narcotics (5.1 percent), health (4 percent), food & non-alcoholic beverages (3.3 percent), restaurant & hotels (2.9 percent) and furnishing, household equipment & routine household maintenance (2.6 percent). In a modest offset, average costs for miscellaneous goods and services reversed to a decline of 1.8 percent, from an increase of 3.3 percent in the prior year. Further, the average reduction in recreation & culture costs extended to 4.4 percent from 1.5 percent a year earlier.”
The increase in prices is supported by an increase in the country’s estimated merchandise trade deficit, which grew by $25.5 million or 4.5 percent to $597.9 million in the first quarter of 2022.
Overall, imports rose by 15.3 percent to $771.8 million, while exports rose 78.9 percent to $173.9 million.
“A further breakdown of trade flows showed that fuel payments increased by 30.3 percent to $218.7 million, on account of the uptrend in international oil prices. In terms of fuel types, average per barrel cost surged for aviation gas oil to $176.72,” the CBOB said.
“Likewise, average per barrel price gains were recorded for gas oil, by 43.2 percent to $94.04; kerosene jet fuel, by 40.1 percent to $102.84; propane, 11.6 percent to $70.79 and motor gas, by 20.4 percent to $104.30. However, the cost for bunker-c fuel remained unchanged at $57.45 per barrel relative to 2021.”
The data on fuel spend comes as petroleum retailers earlier this week said they had reached a crisis point regarding profit margins, with many saying they were spending nearly double for gasoline.
Guardian Business understands the government met with gas retailers yesterday to reach a resolution.
