Inflation to hit record lows in December – experts

October’s Consumer Price Index (CPI) from Statistics Botswana has revealed that headline inflation has continued its downward trend as it further fell from 5 per cent to 4.8 per cent year on year in the period under consideration since its last high of 7.4 per cent in December last year.

According to the national statistics authority, there was a general downward movement of most commodities in the Index. However, the food component which weighs 22 per cent of the total basket saw the largest drop. The CPI reveals a 0.3 per cent decline from the previous month to 4.4 per cent in October. Inflation has moved well into the Bank of Botswana’s 3-6 per cent midterm objective which the central bank says provides for a consistent and sustainable long run economic growth for the country.

Market analysts, Motswedi Securities said Inflation was now at historic low levels and has been on a sharp decline this year from a peak of 7.6 per cent year on year in March mainly due to base effects as large increases that were affected last year (especially fuel prices) fall away from the calculation.

Positive exchange rate movements between the Pula and the Rand, generally stable fuel prices on the international market and subdued inflationary pressures domestically and internationally, have also contributed to lower inflationary pressures this year. As a result, the food component dropped sharply, followed by alcoholic beverages, transport and furnishing, h/h equipment & routine maintenance.

The projection highlights that inflation will further go down before the end of the year if everything else remains constant. “Our forecast is that inflation will now close the year at levels around 4 per cent, assuming that there will be no large increases in international oil prices or changes in local administered prices,” the report said.

It however, offers  caution about the movement; “Reports that the government might review upwards the alcohol levy might however exert some inflationary pressures, although this will simply slow the downward momentum.”
Market analyst at Black Thread Capital, Karabo Tladi shared the sentiments on inflationary movements. He said he expects inflation to go even lower in the coming festive month of December “as retailers reduce prices for promotional purposes.”