Inflation: At 19.5 percent, general inflation remained high in December 2019, albeit 1.3 percent lower than in November. At 22.7 percent, food inflation also slightly declined.
Currency dynamics: The Birr devaluated by 8.1 percent since November. The differential between unofficial and official market rates decreased from 40 percent in November to 33 percent in December.
Food Prices: Based on data from 23 markets, nominal wholesale maize prices were 61 percent above the five-year (2014-2019) average for December and 26 percent above the December 2018 price.
Price movements of imported items including spaghetti, wheat flour and rice in Somali region followed the pattern of change in the exchange rate of Birr against foreign currencies, most importantly against the dollar in the parallel market. A strong positive correlation (r=+0.82) emerged between prices of both cereals (spaghetti and wheat flour) and Birr to US$ exchange rates in the parallel market of Jijiga.
Terms of trade (ToT): Shoat (sheep and goats) to maize ToT improved in southern pastoralist livelihood zones of Somali and Oromia regions, likely due to improved body condition of livestock after normal/above normal 2019 Deyr/ Hagaya rains.
Shoat to maize ToT deteriorated in northern pastoralist livelihood zones of Afar region, possibly due to relatively poor Karma/Kiremt rain, decreased demand because of security incidents, and high staple cereal prices.
Food security outlook: The seasonal decline in staple cereals prices, coupled with a slight inflation dip is expected to ease food insecurity for rural and urban residents reliant on markets.
The continued differential of the Birr against US$ in the parallel market means imported staple cereals (pasta, rice, wheat flour) in Somali region will become more expensive, constraining availability and access.