Friday, January 15, 2021

Inflation slightly up in February

The annual rate of the domestic inflation slightly went up by 0.1 of a percentage point from 3.1 percent in January to 3.2 in the past month of February, latest Consumer Price Index of Statistics Botswana has shown.

Official figures shows that domestic inflation rate has been steadily increasing in the last four months, however it remains within the Bank of Botswana’s medium term objective range of 3-6 percent.

Statistics Botswana’s latest Consumer Price Index (CPI) report for February shows that Group indices were generally moving at a steady pace between January and February 2018, recording changes of less than 1.0 percent.

The Miscellaneous Goods and Services group index gained the most, recording a rise of 0.6 percent between January and February. The increase was on the back of price increases in insurance, personal care and financial services. The insurance industry in Botswana has been under strain due to slow job growth, strained personal incomes and massive retrenchments that have led to more claims payout.

Another notable change was in the Food and Non-Alcoholic group index, advancing by 0.4 percent between the two months. The rise was attributed to the general increase in the section indices except for bread and cereals which did not change. It is expected that in the coming months inflation will steadily increase as food prices continue to go up. South Africa, Botswana’s largest trade partner, has hiked its value added tax, something which is likely to bring costs up. Moreover, the rand has been on a strong rebound, dimishing the benefits that retailers used to enjoy when importing foodstuff using the stronger pula.

The Restaurant and Hotels group index also recorded a rise of 0.4 percent between January and February. The rise was due to the increases in accommodation services, restaurants and cafes.

The All-Tradable inflation rate was 2.8 percent in February, remaining constant as the previous month. The Imported Tradable inflation edged up by 0.4 percent while the Domestic Tradable inflation and the Non-Tradable inflation increased by 0.3 and 0.4 percent respectively.

The Trimmed Mean Core Inflation rate registered an increase of 0.1 of a percentage point moving from 2.9 percent in January to 2.9 percent in February. The Core Inflation rate by exclusion remained unchanged at 2.2 percent between the periods under review. Core inflation excludes the prices of food, non-alcoholic beverages, petrol and energy.

Botswana’s headline inflation is one of the lowest in the region and it is within the Bank of Botswana’s medium term objective range of 3-6 percent. The low inflation rate has been attributed to subdued domestic demand pressures as the country grapples with rising unemployment due to weak job growth prospects, retrenchments, and stagnated wages that have reduced consumers spending power.

The central bank in its last Monetary Policy Committee meeting decided to maintain the bank rate at 5 percent after it concluded that the outlook for price stability remains positive. The central bank has been maintaining an accommodative monetary policy marked by reduction in the bank rate.

“Subdued domestic demand pressures and the modest increase in foreign prices contribute to the positive inflation outlook in the medium term,” said Bank of Botswana governor, Moses Pelaelo, during a briefing of the MPC meeting.

“This outlook is subject to upside risks emanating from improving global economic activity and the rise in commodity prices beyond current forecasts. Furthermore, any substantial unanticipated upward adjustment in administered prices and government levies and/or taxes also present upside risks to the inflation outlook,” read part of his statement.

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