Zimbabwe inflation decline sustainable

Zimbabwe inflation decline sustainable
Published: 28 November 2013
Zimbabwe's inflation levels, which declined last month, is likely to maintain a downward trajectory, analysts said.The Zimbabwe National Statistics Agency (Zimstats) said the country's annual inflation rate for October went down by 0,28 percentage points to 0,59 percent, from 0,86 percent in September.

Economist, Brains Muchemwa, said inflation would remain stable in the short term.

"Prices of most basic commodities, which constitute about 31 percent of the consumer basket, have been stable.... as long the US dollar remains the trading currency, inflation levels will be stable to levels that would not worry policy makers or cause them to panic," he said.

Inflation opened the year at 2,51 percent before topping 2,98 percent in February 2013, but fell down by 0,22 percent to 2,76 percent in March. It continued to fall in April, by a marginal 0,27 percent, to 2,49 percent.  In May the inflation rate shed 0,29 percent, to 2,2 percent. June saw inflation declining by 0,33 percent to 1,87 percent.

In July the rate fell by 0,62 percent to 1,25 percent. In August the rate was 1,28 percent. Year-on-year inflation rate shed 0,42 percentage points to settle at 0,86 percent in September.

The month-on-month inflation rate was -0,01 percent, shedding 0,07 percentage points from September's 0,05 percent.

ZimStats said the decline was abetted by declines in routine maintenance, medical aid contributions and to a lesser extent food and clothing weights.

Zimbabwe's inflation is the lowest in Africa and the continued fall will further improve the attractiveness of the country's macroeconomic environment.

The year-on-year food and non-alcoholic beverages inflation rate, prone to transitory shocks, stood at -0,74 percent while the non-food inflation rate stood at 1,25 percent.

The month on month food and no-alcoholic beverages inflation stood at 0,04 percent in October 2013, shedding 0,22 percentage points on the September 2013 rate of -0,18 percent.

The month on month non-food inflation stood at –0,04 percent, shedding 0,21 percentage points on the September 2013 rate of 0,17 percent.

The consumer price index (CPI) for the month ended October 2013 stood at 100,32 compared to 100,33 in September 2013 and 99,74 in October 2012.

Analysts said the continued pressure on the rand/US$ rate continues to exert negatively on the inflation rate.

Since 52 percent of Zimbabwe's trade - two-thirds of exports and 43 percent of imports - is with SA, Zimbabwe gains from cheaper imports from SA.

As a result, retail prices have been kept steady. On the other hand, the liquidity situation in the country is said to have remained constrained, resulting in weak demand for goods and services. On the whole, domestic price pressures remain subdued, aside from areas exposed to reduced government spending.

Bulawayo-based economic commentator and chartered accountant, Erick Bloch, said low disposable incomes and the consequent drag on consumer spending power, which translated into low demand volumes, had curbed price increases on the local market.

Bloch said however, economic decline, with concomitant diminution in disposable income, is likely to cause some increase in the rate of inflation, as businesses could be forced to increase prices to recover costs.

This, he said, could be countered by supply then exceeding market demand, and hence greater price competitiveness.

Some analysts say the sustained fall in inflation means that the real consumption levels of Zimbabwean consumers is going up, albeit with the same level of income, thereby improving their standard of living. However there has been low spending by consumers lately largely blamed on the liquidity crisis but also on high consumer debt.

The low inflation rate is also ideal for attracting foreign investors. A stable inflation rate is indispensable for planning purposes, as companies' and national budgets will not be eroded, resulting in budget deficits.
- fingaz
Tags: Inflation,


Latest News

Latest Published Reports

Latest jobs