As prices continue to rise and currency continues to buy fewer goods and services, the end-of-year projected inflation rate for 2022 in the Virgin Islands is now set a 6.4%, down from an 8.6% mid-year projection driven by price changes and fuel costs. Photo: Facebook

The Premier detailed that oil prices continues to have the greatest impact on the prices of all items in the basket of goods, particularly in the transportation category of the basket. Photo: Internet Source

Coming from an actual 2021 inflation rate of 2.8%, the projection was revealed by Premier Dr Natalio D. Wheatley (R7) in the 2023 Budget speech delivered on November 29, 2022. Photo: HoA/Youtube

Coming from an actual 2021 inflation rate of 2.8%, the projection was revealed by Premier Dr the Honourable Natalio D. Wheatley (R7) in the 2023 Budget Address delivered at the Ninth Sitting of the Fourth Session of the Fourth House of Assembly (HoA) at Save the Seed Energy Centre in Duff’s Bottom on November 29, 2022.

He said historically, the Virgin Islands has maintained inflation rates below 3%, which was an indication of economic stability and the standard of living for the local people, “However, the rate dropped to an unprecedented low of 0.4% in 2020 during the pandemic, possibly due to the forced departure from the normal consumption patterns of the population.”

This deviation from the norm, he added, rendered the basket of goods and services, monitored by the Consumer Price Index (CPI), useless for monitoring inflation.

The Finance Minister; however, stated that as the effects of the pandemic lessened in 2021, the inflation rate started a steady climb as normal consumption patterns returned, ending the year at 2.8%.

Price changes & Oil costs

Dr Wheatley said the projection for 2022 inflation was driven by price changes in food and non-alcoholic beverages and transportation, which hold a great share of the weights in the basket of goods.

“However, it is the multiplier effect of the drastic changes in oil prices that continues to have the greatest impact on the prices of all items in the basket of goods, particularly in the transportation category of the basket,” Hon Wheatley said,

“For the first nine months of 2022, the highest inflation rate was recorded in April of 5.0%. This rate was driven mainly by movement in the prices of the food and non-alcoholic beverages, housing and utilities, transportation and miscellaneous goods and services categories.”

He added that the combined weight of the four categories constitutes more than 60% of the current CPI basket. Therefore, any movements in any of these categories will have a greater impact on the inflation rate. By September of 2022, the inflation rate in the Virgin Islands was 3.7%.

Premier Wheatley could not be immediately reached for comments on how the government plans to mitigate the effects of projected inflation in the 2023 year. For the medium term, however, prices are projected to inflate at levels below that of 2022, with 4.2% in 2023, 2.6% in 2024, and 2.1% in 2025.