Zimbabwe’s inflation falls sharply to 2.23%

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  • Monthly inflation for January 2020 fell to 2.23% from 16.55% in December 2019
  • The surprise drop was driven by the smaller increases in price of food and non-alcoholic beverages
  • Although the monetary authorities expects inflation to fall, the pressure emanating from exchange rate loss is too high and therefore increases outlook uncertainty

Zimbabwe’s monthly inflation fell much more than expected in January 2020 to 2.23% shedding 14.32 percentage points on the December 2019 rate of 16.55%, latest figures from the Zimbabwe National Statistics Agency (ZIMSTAT) shows.

“This means that prices as measured by the all times Consumer Price Index (CPI) increased by an average rate of 2.23 percent from December 2019 to January 2020,” ZIMSTAT said.

The surprise drop was driven by the smaller increases in price of food and non-alcoholic beverages which shed 13.20 percentage points on the December inflation rate of 15.75% to stand at 2.55% in the month under review.

Meanwhile, the month on month non-food inflation rate stood at 1.99%, shedding 15.15 percentage points on the December 2019 rate of 17.14%.

The government through the Ministry of Finance projected that monthly inflation will fall to a single digit inflation by the end of March 2020, but analysts expected the rate to remain largely unchanged above 10%.

Presenting the Monetary Policy Statement in the capital on Monday 17 February, 2020, the RBZ governor Dr John Mangudya said the Central Bank expects month-on-month inflation to be under 5% by year-end. The Bank has also set a 50% annual inflation target by year end.

Although the monetary authorities expects inflation to fall, the pressure emanating from exchange rate loss is too high and therefore increases outlook uncertainty. In fact, it raises risk on the potential of negative inflation going forward.

According to analysts at Equity Axis, February will see inflation rising above 10% month on month and more than 15% in March.

Equity Axis projects annual inflation to peak to 841.1% by April 2020 and close the year at 364%.

Also fuelling the gloomy inflation outlook are projected drought, government stimulus spending, increased money supply following government’s decision to inject more notes in the economy, rising foreign debt, continued electricity shortages and currency depreciation.

Equity Axis News

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