economic report

The inflation rate has continued to remain subdued at below two percent since 1999 and is expected to decline to 1.3 percent this year, said the Finance Ministry in its latest economic report.

The ministry said the Consumer Price Index registered a small increase of 1.5 percent during the first eight months of this year, the lowest since 1999.

"This was attributed mainly to the relative stability of the exchange rate, low inflation abroad, lower oil and commodity prices as well as excess capacity in several sectors of the domestic economy," said the report.

"The expectation of continued moderation in economic activities, the less favourable employment prospects and relatively weaker consumer confidence will continue to have a moderating effect on domestic prices," added the report.

The moderation in CPI is reflected in most major sub-indices, largely for food, which accounts for more than a third of the total weightage of the CPI.

Food prices increased

The food sub-index increased marginally by 0.6 percent during the first eight months of this year while that of gross rent, fuel and power by 1.6 percent.

Food prices increased marginally, said the report, and was largely due to favourable weather conditions and success of the government's measures to contain price increases of essential goods, particularly food items.

In terms of components, the highest price increase was recorded for beverages and tobacco, at 4.7 percent, reflecting the higher sales tax announced in last year's budget.

Transport and communication increased by 3.9 percent as a result of higher bus fares and prices of petroleum products.

The third highest increase was for medical care and health expenses, at 2.8 percent, attributed to higher prices for drugs.

The prices for gross rent, fuel and power increased by 1.6 percent. These major components of the CPI contributed to 90.1 per cent of the overall CPI increase during the first eight months of this year.