Experts believe that the government's announcement to increase subsidies for essential commodities and fix prices will ease inflation further in the coming months.
Inflation for the month of December 2010 stood at 4.19 per cent on a year-on-year basis mainly due to soaring food prices. However, consumers still continue to feel the pinch of high prices of essential food items like fish, vegetables, sugar and cooking oil.
The prices of food items, beverages and tobacco, which have a combined weightage of more than 30 per cent in Oman's CPI, surged by 4.62 per cent year-on-year in January.
Among the food items, fish and sea products witnessed the biggest rise of 16.7 per cent on the index, while vegetables remained the second biggest contributor to inflation with a 14.9 per cent rise.
Omar bin Faisal al Jahadami, director, consumer protection department, Ministry of Commerce and Industry, said that prices are stabilising and will continue to do so until the end of Ramadan in August this year.
“Prices are stabilising except for food items like sugar and cooking oil. There has been a shortage of fish products in the market which has pushed up fish prices drastically. The government is trying its best to tame inflation. It has announced more allowances and subsidies to fix the price of commodities,” he said.
Margaret Purcell, chief economist, BankMuscat, said once the government's decision in fixing prices is implemented, inflation should ease further. “The moderation in inflation was across most categories like food, beverages, and tobacco. The recently announced measures to subsidise and fix the prices of essential commodities will bring inflation down further in the months ahead. On the flip side, these measures will have an impact on the government's budget balance.”
“There have been concerns about high international food prices, but this might be contained to some degree by the announcement of food subsidies. I think that inflation is at a comfortable level for the Central Bank of Oman,” added Purcell.
The January inflation rate is in line with the central bank’s average estimate of 3.5 per cent for 2011.