MMA Forecasts Inflation Deceleration and Stabilisation Amidst Shifting Economic Landscape

The Maldives Monetary Authority (MMA) has projected a deceleration in inflation during the second and third quarters of this year, with expectations for stabilisation in the final quarter. 

This forecast comes in light of the government’s recent revision in Goods and Services Tax (GST) rates, which is anticipated to drive the domestic inflation rate to 3.4% for the year, as outlined in MMA’s annual report in 2022.

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However, a more recent update suggests that inflation is likely to be 2% lower than the figures reported in October last year. The MMA points out that this adjustment is largely influenced by the government’s decision not to implement proposed amendments to power subsidy this year, causing inflation rates to differ from previous estimates put forth by organisations in line with the current year’s budget.

The central bank further asserts that the inflation trajectory will likely see higher rates during the first half of the current financial year compared to the final quarter of the previous year. Specifically, the MMA defines the first quarter as spanning from January to March. In the last quarter of the previous year, inflation stood at 3.1%.

Looking ahead, the MMA’s report warns about potential challenges stemming from global geopolitical events, particularly the escalating Russia-Ukraine conflict. Such geopolitical factors pose serious risks to the global economy, and the report highlights the potential for increased barriers in the global supply chain.

Despite these concerns, there is hope in the form of falling global oil prices. The report suggests that oil prices may decrease further than previously estimated, which could alleviate some of the inflationary pressures expected this year.

The central bank’s projections indicate that inflation is likely to remain subdued during the second and third quarters of the current financial year, with stabilisation anticipated in the last quarter.

However, the evolving economic landscape and geopolitical developments will continue to play a critical role in shaping the actual inflation figures throughout the year. As the situation unfolds, the MMA stated that they will closely monitor these factors and make necessary adjustments to its projections accordingly.

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