Zimbabwe: Experts Predict Decline in Zim’s Inflation Rate

from allafrica.com..

BY CLIVE MPHAMBELA|Zimbabwe Independent

21 JUNE 2013

ECONOMIC experts have predicted a further decline in Zimbabwe’s inflation rate as the country’s economy slows down and local prices track the declining value of the South African rand, resulting in generally decreasing local prices.

Latest inflation figures released by the Zimbabwe National Statistics Agency (Zimstat) show that the year-on-year inflation rate (annual percentage change) for the month of May 2013 as measured by the all items Consumer Price Index (CPI) dipped 0,29 to 2,20% from the April 2013 rate of 2,49%.

However, while prices as measured by the all items CPI increased by an average of 2,20 percentage points between May 2012 and May 2013, the month-on -month statistics show that prices are actually falling.

The month-on-month inflation rate in May 2013 was -0,21% which was 0,14% lower than the April 2013 rate of -0,07%.

According to Zimstat, this implies that prices as measured by the all items CPI decreased at an average rate of 0,21% from April 2013 to May 2013.

The month-on-month inflation rate is given by the percentage change in the index of the relevant month of the current year compared to the index of the previous month in the current year.

The month-on-month food and non alcoholic beverages inflation stood at -0,28% in May 2013, shedding 0,16 percentage points on the April 2013 rate of 0,44%. The month-on-month non-food inflation stood at -0,17%, shedding 0,32% on the April 2013 rate of 0,11%.

The CPI for the month ending May 2013 stood at 100,94 compared to 101,15 in April 2013 and 98,77 in May 2012.

Zimbabwe’s inflation rate has continued to trend downwards in the last year with the benchmark CPI remaining on a sustained downward trend. Latest figures for May show that annual inflation has slowed further to 2,2% from 2,9% in Feb, 2,76% in March and 2,41% in April.

Invictus Capital Zimbabwe MD, Ritesh Anand, told businessdigest that the sharp decline in economic activity was due to the biting liquidity pressures on the economy which was also contributing to the slowdown in inflation.

“It is difficult to estimate the extent of the slowdown but most corporates are experiencing a sharp decline in sales revenues for the first half of the year. The lack of liquidity is expected to get worse as we head towards elections leading to a further decline in economic activity which is likely to drive inflation lower. This is reflected in the significant decline in bank deposits from US$4,4 billion to about US$3,7 billion end of May 2013, which generally implies a sharp fall in the money supply base of the country,” Anand said.

He said the recent fall of the SA rand from circa 8,5 in Jan 2013 to 9,9 versus the US dollar has a deflationary impact on domestic prices in Zimbabwe given the bulk of our imports come from SA.

Unfortunately, Zim retailers have been reluctant to pass on the benefits of the lower costs to consumers.

While there is a lag effect, Anand said he still expected inflation to continue on a decline given the rand’s continued slide and retailers cutting prices of imported goods.

Anand said on the whole, Zimbabwe desperately needed to create an enabling environment and restore confidence in the economy.

“After four years of growth the economy is showing signs of weakness driven by a lack of investor confidence. Peaceful and credible elections will go a long way in restoring confidence in the economy and economic growth. Zimbabwe is well positioned to benefit from the growing interest in Africa and could be among the fastest growing markets in the region,” he said.

Independent economic analyst, Brains Muchemwa, said more than a third of Zimbabwe’s inflation was explained by the US$/rand exchange rate, considering that South Africa was Zimbabwe’s biggest trading partner on tradeable goods.

“The depreciation of the SA rand over the past few months has filtered in to dampen the domestic US$ prices of goods in Zimbabwe and as such we have been witnessing the slow-down in the CPI,” Muchemwa said.

Muchemwa however said some of the imports coming into the country were non-CPI goods such as cars and machinery and as such, these would not have an immediate effect on the CPI.

With effect from January 2013, Zimstat has been publishing the new CPI with new weights and a new classification in accordance with international guidelines.

The use of a new classification of Individual Consumption by Purpose (COICOP) resulted in the creation of a new classification which resulted in coming up with 83 classes, 41 groups and 12 divisions while in the old classification there were 68 subgroups and 12 major groups. The number of items in the CPI basket has also been increased from 428 to 495.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s