Business Article

Rising Commodity prices and purchasing power

September 19, 2022

Consumer price index and rate of inflation

Consumer Price Index (CPI) measures the average change in the retail prices of goods and services purchased and consumed by households. In Myanmar, the Central Statistical Organization produces the CPI and the rate of inflation monthly, with data collection from 82 townships across all states and regions. The weights used in the production of the CPI are based on the levels of household income and expenditure as observed in the 2012 Household Income and Expenditure Survey.

In April 2022, the CPI increased 3.30 points compared to March 2022, leading to an annual rate of inflation of 10.72% and year on year inflation of 17.78%. Relative to the 2012 base period, the index number for the food group was 206.82, the non-food group was 180.79 and overall CPI was 196.01. Since the data mentioned here are from 4 months ago, so it doesn’t not reflect the current situation.

Rising commodity prices in August and September

In the current situation, people in the country are becoming more deprived as basic commodity and food prices have risen due to the rising dollar prices. The current exchange rate set by the CBM is MMK 2,100 while the market exchange is around MMK 3,300 per USD.  The steep depreciation of the Myanmar Kyat and the rapid rise in inflation has led to sky-rocketing prices for essential items like food, fuel and medicines.

Currently the price of rice has increased by 45 per cent, while the price of palm oil has nearly tripled since last year. At the same time, prices for basic foods such as onions and potatoes has more than doubled, according to local markets. Prices of locally-grown vegetables like watergrass, cabbage and corn have doubled since last year due to higher transportation charges. The prices of peanut oil, sesame oil and sunflower oil are surging. The palm oil prices stayed between K8,500-K9,700 per viss.

In addition, the price of imported fuel has almost doubled since last year, which has affected the transportation sector and commodity prices. Fuel prices went over 2,500 kyats per liter of diesel in September 2022, while it was just around 1,100 MMK per liter of diesel in September 2021. As a consequence, the bus fares of YBS buses went higher than before and for some buses, they even asked for MMK 500 and more. Moreover, the ferry service for the 200-mile-long Yangon-Mawgyun trip hiked the price up to K6,000 per passenger. Furthermore, the freight charge for the Yangon-Pyapon ferry trip increased from K200 to K300 per rice bag.

Rises in the cost of medicines in Myanmar are leaving many without access to treatment, too.  The prices of basic drugs are doubling and clinics often short of supplies. Even medicines commonly used for treating head colds or flu now cost twice as much as they did before the Feb. A packet of the widely used household medicine Mixagrip used to cost around MMK 600 but now sells for around MMK 1,800. According to the owner of a drug store in Yangon, it is difficult to keep pharmaceuticals in stock because the costs charged by suppliers keep changing every day.

Consumer purchasing power and pricing strategy

With the higher of commodity prices and everyday costs, the purchasing power of the consumer is significantly low. Last year, MMK 5,000 can be enough for a daily meal including rice and edible oil, but now at least MMK 10,000 is needed to buy the same thing. So, people started to stop buying non-essential things like snacks and drinks. People just focus on filling in the stock of staple food.

Nevertheless, when there is some news about exchange rate or other stuffs such as the lockdowns of COVID, people are ready to use all their money to stock up their homes. At that time, the prices of the goods go higher and higher with the increasing demand. It’s quite easy for people especially the businessmen to increase a price with the increasing demand but drop down the price is a different story.

At present, lack of confidence on Myanmar kyat continues to deteriorate in the country and affecting access to markets, transport costs, and ability of shops to re-stock. Consumers and businesses are doing their best to confront the uninvited difficulties by using all the effort they’ve left. Only solution is to gain confidence on Myanmar kyat. Who will start and how to solve are still as big question marks in Myanmar economy.