Thursday, June 4, 2020

The calm before the inflationary storm

The domestic consumer inflation figures, as released by Statistics Botswana for the month of March show a nosedive in inflation rate, from 3.2 percent to 2.8 percent.

However, the fall in inflation, is expected to be temporary as the latest data sets does not include recent price adjustments that took effect in the beginning of April.

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

The 0.4 percent decline in inflation rate between the months of February and March was on the account of price decreases in the transport index group, a major component of the CPI basket weights. With a proportion of 20.65 percent, the transport index group is the largest in terms of proportion hence its significant impact in the CPI overall inflation.

Notwithstanding, The Furnishing, House Hold Equipment & Routine Maintenance group index advanced the most at 0.6 percent between the two months. The rise was due to the general increase in the section indices especially Goods & Services for Household Maintenance. Other notable increases were recorded in the recreation culture index group at 0.4 percent, the housing, water, electricity, gas and other fuels index group advanced by 0.3 percent as prices slightly increased for rent paid by tenants and materials for maintenance and repair of dwelling.

Statistics Botswana says all-tradable inflation rate for March decreased by 0.6 percent from the previous 2.8 percent. The Imported Tradable inflation rate went down from 3.8 percent in February to 3.1 percent in March. The Domestic Tradable inflation rate decreased from 0.3 percent in February to 0.1 percent in March. Non-Tradable inflation rate remained unchanged at 4.0 percent during the period under review.

Economists who have previously spoken to The Telegraph said the figures for March are likely to be the last drop in inflation rate before it begins its upward trajectory. The risk to inflation for the coming months is on the upside, given the implementation of price increases in April: the public transport fares, electricity tariffs, and the VAT hike in South Africa,  the country’s most important trade partner.

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