Monday, September 21, 2020

Economists see a downtick in consumer inflation

The central bank – Bank of Botswana has maintained its projection that the consumer inflation in Botswana will only revert to the objective range 3 – 6 percent in the third quarter of 2021 (Q3:2021). 

The monthly Consumer Price Index (CPI) report released by Statistics Botswana in mid-August 2020 shows that the annual inflation rate in July was 0.9 percent, same rate as June. This was the lowest rate since available records began in January of 1997, as prices slumped further for transport by 6.9 percent, following another decline of 6.7 percent in June. Recreation and Culture was down 0.7 percent compared to decrease of 0.8 percent in June. 

In contrast, inflation edged higher for food & non-alcoholic beverages (3.9 percent vs 3.6 percent), housing & utilities (5.9 percent vs 5.7 percent) and alcoholic beverages & tobacco (6.6 percent vs 5.4 percent). On a monthly basis, consumer prices were up 0.2 percent, after falling 1.2 percent in the previous month.

Given that consumption and spending in the both the domestic and global economies have been disrupted, economists at the central Bank said last week that the domestic demand pressures and foreign prices remain subdued.

“Consequently, overall risks to the inflation outlook are skewed to the downside,” said Bank Governor – Moses Pelaelo on Thursday during a virtual Press Briefing.

Pelaelo said that domestic inflation may rise above current forecasts if international commodity prices increase beyond current projections and in the event of upward price pressures occasioned by supply constraints due to travel restrictions and lockdowns.

The COVID-19 pandemic and consequent containment measures have severely throttled economic activity globally and domestically as production, supply chains, project implementation and provision of goods and services are constrained. 

Official figures availed to date shows that the Botswana government has spent P4 billion on the COVID-19 Economic Stabilisation Plan, a short-term plan developed and implemented during a tough lockdown that ran from April to June 2020. 

Meanwhile Government revenues are projected to be 16 percent lower in the current, 2020/21 financial year than they were when the Mid-Term Review was prepared.  

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