Wednesday, June 23, 2021

Inflation to edge higher as Fuel prices continue to rise

Consumer prices in the domestic economy spiked from 2.8 percent to 3.4 percent according to the recently released data from Statistics Botswana.

The latest rate is the largest in over 8 months but still remains within the Bank of Botswana’s objective range of 3 ÔÇô 6 percent.

The increase in inflation was highly expected in the latest data set which includes recent price adjustments that took effect in the beginning of April. Economists have warned that more inflationary pressures exist.

The consumer price index (CPI) ÔÇô which measures inflation- for March reveal an increase in inflation rates for both regions: rural villages, cities and towns, as well as urban areas.

The 0.6 percent surge in inflation rate between the months of March and April was on the account of price increases in the miscellaneous goods and services, as well as for the transport index and utilities group. The biggest increase was recorded from the miscellaneous group and services, up by 5.3 percent on the back of price increases in the insurance sector. Insurance companies in Botswana have been hit by a spate of large claims in the last two years, with some of the exposure coming from retrenchments, as well as shrinking pool of new businesses.

The transport index group, a major component of the CPI basket weights went up 2.3 percent following last month’s increase in public transport fares. With a proportion of 20.65 percent, the transport index group is the leads the pack and has significant impact in the CPI overall inflation.

The Housing, Water, Electricity, Gas & Other Fuels index group, another important component the CPI basket, registered a rise of 1.5 percent between March and April. This was attributable to power tariffs hike that kicked in the beginning of April, while water tariffs also added to the inflationary pressures.

Other notable increases were recorded in the recreation culture index group at 0.6 percent, the restaurant and hotels index group advanced by 0.5 percent, clothing and footwear up by 0.4 percent. Most group indices remained flat except for the Alcohol and Tobacco group index that retreated by 1 percent.

Statistics Botswana says all-tradable inflation rate decreased by 0.1 percent to 2.1 percent April. Non-Tradable inflation rate is at 5.8 percent in April, up by 1.8 percent from the March figure. The Imported Tradable inflation remained constant at 3.1 percent between the two periods. The trimmed mean core inflation rate in April was 3.1 percent, up 0.5 percent from the March rate. The core Inflation rate by exclusion – which excludes items like food and energy which are subject to volatile prices – was 1.9 percent, a drop of 0.1 percent from the previous rate.

Economists who have been surveyed by Sunday Standard said the figures for April are in line with the unfolding events. In March, the economists had warned that a drop in inflation for the month of March was only temporary and they expected inflationary pressures to kick in April. One of the economists said the risk to inflation for the coming months is on the upside after the government increased prices for fuels such as petrol, diesel and paraffin.

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