Cemac: inflation stagnates at 5.1% in the 1st quarter of 2024, far from the community standard of 3%
The Economic Pulse of CEMAC: Navigating Inflationary Challenges
The Central African Economic and Monetary Community (CEMAC) has faced a challenging economic landscape in the first quarter of 2024, with inflation rates hovering at 5.1%, a figure that notably exceeds the community’s standard of 3%. This deviation from the norm raises concerns about the economic stability and purchasing power within the member states.
Inflation Dynamics in CEMAC: A Closer Look
Inflation, the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling, is a critical economic indicator. For CEMAC, a region striving for economic integration and development, maintaining inflation at manageable levels is essential for fostering a conducive environment for investment and growth.
The International Monetary Fund (IMF) has highlighted the benefits of favourable hydrocarbon prices in 2022, which bolstered economic recovery and strengthened external positions. However, the non-oil fiscal positions have shown signs of deterioration, emphasizing the need for accelerated reforms and fiscal prudence.
The World Bank’s Spring 2024 edition of the CEMAC Economic Barometer echoes these sentiments, pointing out that growth in the region has been insufficient to drive substantial poverty reduction. The report underscores the necessity for targeted spending on infrastructure and social areas, as well as reforms to invigorate the private sector and enhance public services.
Forecast and Policy Recommendations
The Bank of Central African States (Beac) forecasts a decrease in the inflation rate to around 3.9% in 2024, down from 5.6% in 2023. This projection is contingent upon continued monetary policy tightening by the regional central bank and a decline in commodity prices.
To navigate the inflationary pressures, policy recommendations include further tightening of monetary policy to anchor inflation expectations and bring reserves to adequate levels. Additionally, addressing fiscal slippages, saving part of the oil windfall, and completing subsidy reforms are advised to ensure a coherent policy mix and strengthen fiscal sustainability.
The Road Ahead
The CEMAC region’s economic outlook is cautiously optimistic, with moderate growth expected. However, this outlook is subject to risks such as commodity price shocks, higher borrowing costs, global trade disruptions, climate disasters, and regional insecurity and conflict.
As CEMAC navigates these challenges, the focus on reforming economic governance, fiscal discipline, and investment in human capital will be pivotal in achieving the community’s standard of inflation and, more importantly, in laying the groundwork for long-term economic resilience and prosperity.
5.1%. This is the inflation rate in the Cemac zone in the 1st quarter of 2024, reveals the Central Bank. Although this macroeconomic indicator is down compared to 5.6% in the 4th quarter of 2023, it is still higher than the Cemac community standard set at 3%. On a year-on-year basis, this indicator is down 1.3% compared to the 6.4% recorded at the end of March 2023.
During the first quarter, the increase in prices in the Cemac zone was mainly fueled by the “food products and non-alcoholic beverages” and “transport” functions, despite a downward trend. In detail, the transport function increased from 4.6% at the end of March 2023 to 14.2% at the end of March 2024, in connection with the increase in fuel prices at the pump in Cameroon (in February 2024 for the 2nd consecutive time), in Congo (August and October 2023) and in Chad (February 2024) in connection with “the substantial reduction in subsidies on hydrocarbon prices advocated within the framework of the Member States with the IMF”, indicates the Beac in its note on the “Evolution of inflation in the Cemac zone in March 2024 and short and medium term outlook”. This immediately led to an increase in the prices of transport services, the costs of industrial inputs in particular.
On the side of the food and non-alcoholic beverages function, its consumer price index as of March 31, 2024, is 5.3% against 11.2% for the same period in 2023. This is due to disruptions linked to climate change, the climate of insecurity that prevails in the North-West and South-West regions of Cameroon and the supply of markets with food products in the area, in the face of dynamic domestic demand, explains the Beac. Behind these two main functions, we can also classify goods and services, furniture and household items and routine household maintenance which show an inflation rate of 4.5 at the end of March, followed by clothing and footwear (4%) and the restaurant and hotel function with 3.1%.
As other factors that contributed to reducing the upward trend of the consumer price index, the BEAC note also cites “the decline in the prices of liquid and gaseous petroleum products internationally, the fall in the FA index of food prices and the depreciation of the naira” which made imports from Cameroon and Chad cheaper from Nigeria, argues the BEAC.
Spatially, inflation is driven by Cameroon with an inflation rate of 6.6%, or 52% of the total consumption of the sub-region. Then comes Congo with an inflation rate of 4.7%, then Chad with 3.9%, and Gabon with 2.9%. At the bottom of the scale are Equatorial Guinea and the Central African Republic with an inflation rate of 2% and 1.1% respectively.
Given the trend observed during the first quarter, it is not excluded that this indicator will return to normal (3%) in the sub-region. Moreover, the Central Bank’s forecasts for this purpose are based on an inflation rate of 3.9% at the end of the current year.
