Monday, September 28, 2020

Inflation falls slightly in June

In line with expectation, the national year on year inflation fell on the back of washing-off of the impact of Value Added Tax (VAT) and higher electricity tariffs effected earlier in the year.

The Central Statistics Office (CSO) said on its monthly Consumer Price Index (CPI) update that in June 2010, national year-on-year inflation rate stood at 7.7 percent, down by 0.1 of a percentage point from 7.8 percent in May 2010.

Garry Guma, an analyst with Motswedi Securities, said inflation will stabilise between 6 and 8 percent in the long term.

“Looking ahead, although inflation is expected to end the year above the Bank of Botswana medium term objective range of 3-6 percent, it is expected to stabilise at levels between 6 percent and 8 percent due to weaker household disposable incomes and slower growth of government spending,” Guma said.

The 2 percent VAT increase in April coupled with 30 percent electricity tariffs added pressures on consumer, especially when the economy did not entertain salary adjustments.

The CSO update showed that most of the basket items were stable, with marginal increases in the ‘alcoholic, beverages, tobacco & narcotics’ which rose to 8.3 percent y/y in June from 8.1 percent y/y in May.

‘Communication’ came in at 1.8 percent y/y from 0.8 percent y/y the previous month, while ‘furnishings, household equipment, and ‘health’ were unchanged at 9.2 percent y/y and 3.1 percent y/y respectively.

“As a result, the Central Bank is widely expected to leave interest rates unchanged at its next meeting in line with weaker inflation expectations,” Guma added.

The rural villages’ inflation rate registered an increase of 0.1 of a percentage point from 6.9 percent in May to 7.0 percent in June.

The cities and towns’ inflation rate went down by 0.2 of a percentage point from 8.7 percent in May to 8.5 percent in June. The urban villages’ inflation rate was 7.0 percent, down from the May rate of 7.2 percent by 0.2 of a percentage point.

The June national Consumer Price Index was 138.1, registering an increase of 1.3 percent on the May index of 136.3. The cities and towns’ index moved from 134.8 to 137.0 between May and June, an increase of 1.7 percent.

The urban villages’ index went up by 1.1 percent, from 135.4 to 137.0 between the two months while the rural villages’ index rose from 141.6 in May to 142.8 in June, recording an increase of 0.8 percent.

Only three group indices recorded a change of at least 1.0 percent between May and June ÔÇô Transport (5.3 percent), Furnishing, Household Equipment & Maintenance (1.5 percent) and Communication (1.0 percent).

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Sunday Standard September 27 – 3 October

Digital copy of Sunday Standard issue of September 27 - 3 October, 2020.