June 01, 2023 (MLN): In the relentless grip of inflation, the economy has been devastated, casting its darkest shadow upon the already impoverished citizens.
Especially, the last eleven months endured an unforgiving rush in prices, rendering them vulnerable to a system that seems ignorant to their dilemma.
Expectedly, the month of May was no different in terms of rising prices. As per our estimations, the headline inflation for May 2023 is expected to settle around 36.7% – 39.6% with an average estimate of 37.84% YoY compared to 36.4% YoY in the last month and 13.8% YoY in May 2022.
This will take the average inflation of 11MFY23 to 29% YoY compared to 11.3% YoY in 11MFY22.
On a sequential basis, the CPI would likely surge by around 1.55% compared to the 2.9% MoM increase in the month of April 2023.
The estimated inflation numbers for the month of May have surpassed the projection put forth by the Ministry of Finance which stated that the inflation will remain in the range of 34%-36%.
| CPI projections for May | YoY | MoM |
|---|---|---|
| Arif Habib Limited | 37.3 | 1 |
| AKD Securities | 36.7 | 0.6 |
| Ismail Iqbal Securities | 38.2 | 1.8 |
| Insight Securities | 38.2 | 1.7 |
| Adam Securities | 39.6 | 2.8 |
| Taurus Securities | 38.5 | 2 |
| Spectrum Securities | 37.5 | 1.4 |
| Sherman Securities | 37.1 | – |
| Abbasi and Company | 37.5 | 1.1 |
| Average | 37.84 | 1.55 |
| Range | 36.7-39.6 | 0.6-2.8 |
| 11MFY23 | 29 | 2.4 |
The potential reasons for the rising price level are flood damages, disruptions in supply chains, devaluation brought by macroeconomic imbalances, and political uncertainty.
However, improvement in the global supply chain will ease domestic prices in the coming months.
SBP, being the supreme authority has tried hard to crush the ugly head of inflation by playing the strings of interest rate on higher notes. However, no noticeable result is seen yet.
In its latest MPC meeting, the SBP decided to raise the policy rate to an all-time high by 100 basis points (bps) to 21%.
The authority considered the current monetary policy stance appropriate and stresses that the decision, along with previous accumulated monetary tightening, will help achieve the medium-term inflation target over the next quarters.
In addition, the government has reduced the petrol prices by Rs12 per litre in the outgoing month to extend some relief to the masses.
It is pertinent to note that the ongoing spree of inflation is primarily due to the conditions put forth by IMF with no hope of a tranche still.
Outlook:
As elections are approaching, the government is repeatedly assuring that a people-friendly budget is on the way and may bring some ease for a short period of time.
According to the analyst fraternity, the trend would start to be tamed around in the second half of the current year (2023) mainly due to the high base effect.
Copyright Mettis Link News
Posted on: 2023-06-01T12:14:02+05:00
