Central Bank’s Optimistic Inflation Outlook Faces Setback in 2025

Central Bank of The Gambia © Askanwi

By Yusef Taylor, @FlexDan_YT

Despite the Central Bank of The Gambia’s earlier projections for a decline in inflation, the latest figures show a slight increase to 10.2% in early 2025, driven largely by rising non-food costs, including housing, energy, and services. The country's growing trade deficit, fueled by a heavy reliance on imports, continues to challenge the Gambian economy, even as global inflation trends shift and commodity prices fluctuate.

Inflation measures the rate at which the price of goods and services increases.

The Gambian economy is heavily reliant on imports, while exports remain minimal. According to the International Merchandise Trade Statistics from the Gambia Bureau of Statistics (GBOS), the total value of imports increased from D16.2 billion in the second quarter of 2024 to D20.6 billion in the third quarter. On the other hand, the value of exports rose from D638.8 million in the second quarter of 2024 to D762.6 million in the third quarter.

GBOS data shows that, over a 12-month period (from Q4 2023 to Q3 2024), The Gambia's trade deficit exceeded D62 billion. During this period, the country exported products worth only D3 billion while importing products valued at over D65 billion. This means exports accounted for just 4.8% of imports. Due to the nation’s heavy dependence on imports, global inflation trends significantly impact the Gambian economy, although prices rarely fall due to factors like exchange rates and other local influences.

Gambia Trade Deficit © Askanwi

Global Inflation Projection for 2024 Revised to 5.7%

In October 2024, the Central Bank reported that the International Monetary Fund (IMF) had initially projected global inflation to decline from 6.7% in 2023 to 5.8% in 2024. However, the IMF has since revised this figure down further to 5.7%.

Regionally, the Central Bank’s October 2024 brief had forecast that inflation in sub-Saharan Africa would decrease from 16.3% in 2024 to 9.8% by 2025. However, the IMF’s most recent data now projects inflation in sub-Saharan Africa to stand at 13.7% in 2025, rather than the single-digit reduction previously promised. Despite this, the Central Bank maintains that inflation in the region is still expected to decline at a faster pace in 2025, although it will remain higher than earlier projected levels in 2026.

As for global commodity prices, the IMF projects a decline from 6.0% in 2025 to 2.0% in 2026. This suggests an improvement compared to last year, when the IMF Commodity Price Index rose by 3.0% from September to October 2024. Factors contributing to this increase include "unfavorable weather conditions, geopolitical tensions in the Black Sea, and strong demand in certain markets."

FAO Reports Slight Price Decline in January 2025

Turning to the Food and Agriculture Organization (FAO) of the United Nations, a slight decline in global food prices was recorded in January 2025. This was primarily due to a significant drop in sugar prices, which outweighed increases in dairy and cereal prices.

However, in The Gambia, sugar prices continue to rise, reflecting a disconnect with global market trends. It remains unclear whether this is due to importers unwilling to lower prices or if other factors, such as fluctuating exchange rates, are at play.

Rice is a key staple food in The Gambia, and international rice prices saw a notable decline in January 2025, driven by subdued demand. According to the FAO Rice Price Index, prices fell by 4.7% from December 2024 to January 2025, and 20.4% year-on-year. Askanwi reporters will continue to monitor rice prices throughout 2025.

Central Bank of The Gambia © Askanwi

Non-Food Inflation Outpaces Food Inflation Decline

Looking at domestic inflation, the rate remained steady at 10% from September to October 2024. The Central Bank had previously projected that inflation would fall back to single digits by the first quarter of 2025, barring any unforeseen disruptions in international commodity prices. However, this expectation did not materialize, as inflation slightly increased to 10.2% in January 2025, unchanged from December 2024.

The government has now revised its target to bring inflation back to single digits by mid-2025, again depending on the absence of shocks from international commodity prices or domestic price adjustments.

While food inflation has traditionally been the biggest concern, non-food inflation has emerged as a significant issue. Food inflation saw a marginal decrease from 12.8% in December 2024 to 12.7% in January 2025. However, non-food inflation rose from 6.6% in October 2024 to 7.3% in January 2025.

According to the Central Bank, the slight decrease in food inflation was driven by moderation in the prices of key food items, including fish, milk, cheese, eggs, fruits and nuts, vegetables, and sweets. This decrease offset the rise in prices for bread, cereals, meat, and oils and fats.

It is important to note that bread shortages have recently affected the country, with the Ministry of Trade reporting ongoing discussions to stabilize the price of bread at D10. These discussions began in February 2025 and may influence food inflation moving forward if not addressed adequately.

Impact of Non-Food Inflation

The Central Bank attributes the increase in non-food inflation to higher prices in housing, energy, and services. In February 2025, a fuel shortage prompted the Ministry of Petroleum to issue a statement on February 12th, assuring the public that the supply chain had been restored and urging against panic buying. The shortage was due to a delayed shipment of gasoline, but if not properly managed, this could worsen non-food inflation in the next quarter. 

As The Gambia navigates its economic challenges, the government's revised inflation targets for mid-2025 underscore the delicate balance between global market trends and domestic factors. While global commodity prices show signs of stabilization, the country’s reliance on imports and the continued rise in non-food inflation present ongoing risks. The coming months will be crucial in determining whether the Central Bank’s optimistic outlook can be realised or if additional economic pressures will delay a return to single-digit inflation. The government’s ability to manage domestic shortages, such as the recent fuel crisis, will also play a critical role in shaping the nation’s economic future.