Wednesday, September 30, 2020

Botswana inflation hits single digits in line with expectations

In line with what local commentators have stated at the beginning of the year, the year-on-year inflation rate fell to a single digit in 13 months even before the fall of 2009.

Data released by the Central Statistics Office (CSO) this week showed inflation trending down significantly by close to 2 percent and keep Botswana analysts employed.

The May figures showed inflation stood at 8.4 percent, down by 1.8 percentage points from 10.2 percent in April.

Two analysts interviewed by Sunday Standard in March concurred that a single digit appeared likely before the end of the year.

Stockbrokers Botswana analyst, Pulafela Isaacs, said then that given the current turmoil in the world economy, where one anticipates a fall in demand as a result of a possible reduction in disposable income, the belief is that inflation ‘may hit a single digit before the end of the year’.

He was supported by Bakang Seretse, a Fund Manager at Investec, who said fundamentals are pointing at the same direction.

CSO figures stated that the towns and cities inflation rate fell by 1.9 percentage points from 8.4 percent in April to 6.5 percent in May.

On the other hand, the urban villages’ inflation rate decreased from 10.4 percent in April to 8.7 percent in May, a decrease of 1.7 percentage points.

The rural villages’ inflation dropped from 14.3 percent in April 2009 to 13.4 percent in May 2009, a decrease of 0.9 of a percentage point.

The May national Consumer Price Index was 126.4, recording an increase of 0.3 percent on the April index of 126.0.

The rural villages’ index rose from 131.7 to 132.5, an increase of 0.6 percent. The Urban Villages’ index rose by 0.2 percent from 126.1 to 126.3 between the two months.

However, the trend might be halted by the recent spike in crude oil prices, which is inflationary.

Seretse argued that: “Most commodities are still down and therefore we should not worry of an immediate risk in inflation.”

“As far as Monetary Policy is concerned, again Bank of Botswana will take time to get a better understanding of the situation. We should remember that monetary policy does not act in inflation of now but of many months from now. Therefore the increase in oil prices should be sustained long enough for Bank of Botswana to act on it,” he added.

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