Tuesday, May 21, 2024

BoB says inflation will fall further, albeit temporarily 

Consumers should expect a further decline on the inflation figures come the 15th of September 2023 when Statistics Botswana releases the Consumer Price Index (CPI) figures for the month of August 2023, the central bank has said.

The Bank of Botswana Governor Moses Pelaelo told journalists at the Monetary Policy Committee (MPC) brief on Thursday that when the statistics agency  releases the monthly CPI figures mid next month, there is a likelihood of a drop from July’s 1.5 percent to 1.2 percent.

Despite the projected drop, Pelaelo cautioned that it is temporary.

“Inflation is forecast at 1.2 percent for August 2023 and the MPC projects that inflation will remain below the lower bound of the objective range temporarily and revert to within the objective range from the first quarter of 2024 into the medium term,” Pelaelo said.

Pelaelo said that the projected low inflation is due to, among others, subdued domestic demand and the downward revision in recent forecasts of international food prices and trading partner countries’ inflation.

He further said that the risks to this inflation profile/trajectory were assessed to be balanced.

The central bank says in addition to the dissipating impact of increases in administered prices in 2022, the economy is expected to operate below full capacity in the short term and, therefore, not generate demand-driven inflationary pressures.

Botswana experienced rapid acceleration in consumer prices, with domestic inflation jumping from an average of 6.7 percent in 2021 to an average of 12.2 percent in 2022. The 2022 average inflation was much higher than the 10-year (2013-2022) 8 percent in December 2021 to 11.2 percent in December 2022, while inflation excluding administered prices increased from 7.1 percent to 8.7 percent in the same period.

Inflation for domestic tradeables was 12.4 percent in December 2022, compared to 5.3 percent in December 2021, largely due to broad-based price increase of food items, according to Bank of Botswana’s 2022 annual report. Similarly, imported tradeables inflation rose from 14.2 percent to 18 percent in the same period, reflecting higher prices of vehicles. As a result, all tradeables inflation increased from 11.7 percent in December 2021 to 16.5 percent in December 2022.

Figures published by Statistics Botswana recently show that the country’s inflation rate eased to a historic low of 1.5 percent in July 2023 from 4.6 percent in June.

The July 2023 CPI figures shows that the group indices were generally moving at a stable pace between June and July 2023, recording changes of less than 1.0 percent, except the Transport group which recorded a decrease of 3.0 percent.

Statistics Botswana says the contribution of -2.0 percentage points by the transport group, applied a downward movement on the July 2023 annual inflation rate. The Transport group index registered a decrease of 3.0 percent, from 150.6 in June to 146.1 in July 2023 which is mainly attributable to a decline in the constituent section indices of Operation of Personal Transport (5.1 percent) and Purchase of Vehicles (0.7 percent).

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