By Claude Urbain PLAGBETO,

The inflation rate is projected at 2.2% in 2020 in WAEMU after -0.7% in 2019. The Covid-19 crisis and the rise in the price of cereal products are the basis of the rise in the level of price.

The general level of prices previously projected at 1.8% would finally stand at 2.2% for the whole of 2020, an increase of 2.9 percentage points compared to 2019 (-0.7%) , according to the latest Report on monetary policy in the West African Monetary Union (UMOA). This development, explains the Central Bank of West African States (Bceao) , would be linked to the decline in food production during the 2019-2020 agricultural campaign, particularly in Niger, Burkina Faso and Mali, the impact of the Covid-19 pandemic as well as the recovery in the prices of imported food products in 2020.

In the third quarter of 2020, the inflation rate stood at 2.9% compared to the same period in 2019, after 1.7% in the previous quarter, according to the BCEAO document. This increase in the general level of consumer prices observed in the States, with the exception of Côte d'Ivoire and Guinea-Bissau, is mainly driven by the "Food" component, which increased by 5% in third quarter of 2020, compared to 3% a quarter earlier.

This resulted in higher prices for local cereals, fish products, fresh vegetables as well as tubers and plantains. Breaks in communication channels, following the floods observed in some countries during the months of August and September, have also increased tensions on food prices, specifies the Bceao report.

If the travel restrictions, the limitation of working hours, the closure of borders and markets due to Covid-19 had led to the acceleration of the rate of inflation during the previous quarter, the health crisis still weighs on the prices of land and air transport services despite the lifting of certain barrier measures. By way of illustration, there is a 23.7% increase in said prices in Benin.

Risks

The evolution of inflation remains uncertain and will depend on the extent and duration of the effects of the health and economic crisis on supply and demand factors. Two additional scenarios, one bullish and the other bearish, are developed outside the central scenario, to frame the medium-term outlook for inflation.

Downside risks could stem from the assumption of a fall in the price of petroleum products due to the slowdown in transport, due to an economic environment marked by weak global demand, and the increase in food production in the campaign. 2020-2021. On the other hand, the upside risks could come from the rise in food prices, in connection with tensions on the supply, the impact of climate change on local cereal production and the persistence of the disruption of the distribution circuits of certain products. .

According to the central scenario, the inflation rate, compared to the same period of the previous year, is projected at 2.8% in the fourth quarter of 2020, after an achievement of 2.9% in the previous quarter, in line with the easing of the restrictive measures taken by States to deal with the new coronavirus pandemic. Over the next eight quarters, i.e. at the end of September 2022, the inflation rate should stand at 1.8% (1.0 % in the downside scenario and 2.6% in the upside scenario) year-on-year, thus remaining in the comfort zone between 1% and 3%, defined for the implementation of the Union's monetary policy.