Zimbabwe Set to Maintain Single-Digit Inflation

Zimbabwe's capital Harare

Zimbabwe has begun to experience a dissipation of underlying inflationary pressures in the economy and looks set to maintain single- digit inflation this year, the Reserve Bank of Zimbabwe has said.

The decline in quarterly annualised inflation from 5,9 percent in September to 4,47 percent in October showed significant easing.

Giving an analysis of the October inflation developments, the central bank stated that going forward, such factors as the US$/rand exchange rate would continue to influence future movements.

“In the short to medium term, inflation developments in the economy will continue to be influenced by the US$/rand exchange rate, international oil prices, world food prices, utility charges and the performance of the 2011/12 agricultural season,” said an analysis from the bank’s economic research division.

The US$/ rand exchange rate reached a peak so far this year of US$1 to R8,4 in September before sliding to R7,7 last month.

Oil price movements have also been fluctuating between US$127 and US$115 per barrel in the last six months.

Annual food inflation dropped to 3,68 percent in October from 4,01 percent while non-food inflation surged marginally to 4,44 percent from 4,43 percent.

The main annual food inflation drivers for October were vegetables, meat, oils and fats, mineral water soft drinks and fruit juices while non-food inflation drivers communication, transport, utilities, restaurants and hotels, furniture household equipment and maintenance according to the Zimbabwe National Statistics Agency.

The upsurge in beef prices has been partially driven by reduced supply of beef from Botswana and the decline in the national herd. Small-scale farmers are also starving the market because they are using their herd to prepare land for planting. The July tariff increase by Zesa also pushed up inflation in housing water, electricity and gas category.

“The increase in the price of gas due to the current supply constraints being experienced in South Africa, the country’s major supplier, partly explains the increase in housing, water, electricity, gas and other fuels category, though the increase was lower in the month under review,” said the central bank.