Prices drop by 1.6pc

Prices fell by 1.6 per cent last month compared with a year earlier, official statistics revealed yesterday - the second consecutive month of deflation.

Analysts said the price adjustment was happening faster than expected as the economy continued to react to the regional economic turmoil.

The fall followed a 0.7 per cent drop in the composite consumer price index in November.

The Government blamed weak consumer demand and a further decline in rents.

The statement also identified a freeze in bus fares since December 1997 as a cause of the overall fall in consumer prices.