by Ifham Nizam

Inflation is expected tobe moderate further to a single digit of seven to eight per cent for the year on average, says Central Bank Deputy Governor W. A. Wijewardena.

Meanwhile, Central Bank sources said that as in the recent past, price movements will depend primarily on supply side factors, this year too.

Maintenance of monetary expansion consistent with the macroeconomic stabilisation programme will help mitigate any inflationary pressure from the demand side.

Domestic activities, such as in food production and movements of international prices of major imports, with oil in particular, exchange rate movements and administered price varitions, if any, would influence inflation this year. The sources also said that undue volatility or change is not expected in any of these factors during the reference period, unless an unusual shock is experienced internally or externally.

According to the GDP forecast, production of major food commodities is expected to expand this year. The expected growth rates are five per cent for fish, three per cent for coconut, two per cent for paddy and one per cent for other agriculture commodities.

The balance of payments (BOP) projections indicate that the international prices for major imports such as rice, wheat, sugar, other food products and fertiliser would increase by two per cent to eight per cent this year.