• Month on month inflation increased to 2.5%
  • Year on year settled at 17.8%
  • However, a big storm lies ahead

Harare- Zimbabwe's statistics agency, ZIMSTAT, says the month-on-month inflation rate in October 2023 increased to 2.5%, which is 1.5 percentage points higher than the September 2023 rate of 1%. This means that prices, as measured by the all-items Consumer Price Index (CPI), rose by an average of 2.5 percent from September 2023 to October 2023.

ZIMSTAT uses a blended inflation calculation method, which may create a perception of hope for the Zimbabwean dollar and inflation outlook, although the reality may be different.

Zimbabwe experienced an increase in both the month-on-month inflation rate for Food and Non-Alcoholic Beverages and the month-on-month inflation rate for non-food items.

The month-on-month inflation rate for Food and Non-Alcoholic Beverages rose to 2.4 percent in October, which was an increase of 1.3 percentage points compared to the September rate of 1.1 percent.

This suggests that the prices of food and non-alcoholic beverages increased at a faster pace during October due to currency volatility.

Similarly, the month-on-month inflation rate for non-food items reached 2.5 percent in October, showing a gain of 1.6 percentage points from the September rate of 0.9 percent.

This indicates that prices of non-food items, such as goods and services excluding food, also experienced a notable increase during October primarily driven by currency crisis, electricity crisis, forex deficit and imported inflation.

These increases in inflation rates for both food and non-food items indicate a general upward trend in prices during October 2023. It suggests that the cost of living and purchasing goods and services in Zimbabwe became more expensive during that month.

The Consumer Price Index (CPI) was 103.44 in October 2023, 100.95 in September 2023, and 86.79 in October 2022. As a result, the year-on-year inflation rate, which measures the annual percentage change, stood at 17.8 percent.

Zimbabwe is currently facing a challenging economic outlook, particularly in terms of inflation, as the Zimbabwean dollar continues to depreciate rapidly on the parallel market.

The depletion of export earnings, which is expected this year due to geopolitical tensions impacting global commodity prices, will have a significant impact on Zimbabwe's foreign currency reserves. As a result, there may be a shortage of foreign currency, making it difficult for companies to access the necessary funds to import essential goods and services. This shortage of foreign currency will push companies to resort to the black market, where they may face higher exchange rates and engage in illegal transactions to meet their foreign currency needs.

Despite the initial stability of commodity prices during the first half of 2023, companies still faced challenges due to foreign exchange deficits.

With the subsequent decline in commodities, this situation is expected to worsen.

All industries are now at risk, particularly in light of the recent increase in electricity tariffs by ZESA to US$c12.63 per kilowatt-hour.

However, exporters who surrender 25% of their foreign currency earnings will be further affected, as they will receive the RTGS component at an overvalued auction market rate.

In light of these circumstances, we strongly advise companies to proactively prepare for the worst, despite any optimistic government statistics that may suggest otherwise.

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