Consumers prices will continue rising as businesses adjust to the second-round effects of administered prices, said local businesses who are experiencing increase in input costs.
The businesses surveyed as part of Bank of Botswana’s quarterly Business Expectations Survey (BES) expect cost pressures to continue rising into the third quarter of 2021, mainly attributable to the expected increase in all input costs, due to upward adjustment in value added tax (VAT), fuel and electricity costs.
Businesses’ expectations about domestic inflation rose in 2021 but remained within the central bank’s inflation objective range of 3-6 percent. The firms expect inflation rate for both 2021 and 2022 to average 5 percent, lower than the actual prevailing rate.
The inflation rate soared to 8.2 percent in June, the highest rate in a decade, according to Statistics Botswana’s recent consumer price data. Consumer prices have been on the rise since the beginning of the year and breached the medium objective range of 3 – 6 percent in May as the inflation rate ticked to 6.2 percent.
The rise in prices this year has put an end to a low inflationary environment that has been running for ten years. The easing of the inflation started with 2012’s average rate of 7.5 percent dropping to 5.9 percent in 2013, and continued to 4.4 percent the following year, and by 2015 it was at 3 percent. The inflation rate’s descent went below Bank of Botswana’s threshold in 2016, with the rate recorded at 2.8 percent, before increasing slightly to 3.3 percent in 2017 and retreated to 3.2 percent in 2018.
