4 January 2013

Zimbabwe: 'Inflation to Remain Stable'

Zimbabwe's annual rate of inflation for 2013 is likely to stabilise around the 5 percent mark, economic commentators have said. Local economist Mr Brains Muchemwa said this was anchored on the basis of low demand for consumer goods due to liquidity challenges.

"The inflation target of 5 percent is achievable on the back of a very stable pricing mechanism emanating from the multiple currency regime," he said.

"Equally, the stagnating and weakening disposable incomes arising out of increasing household indebtedness will continue to put demand-pull inflation under check."

Although inflation figures for December are yet to be released, it is most likely that the annual inflation rate closed around the targeted 5 percent mark for 2012.

According to the last figures from the Zimbabwe National Statistical Agency, the country's annual inflation decelerated from 4,2 percent in November 2011 to 3,0 percent in November 2012.

A breakdown of the statistics shows that the key drivers of annual inflation included education (14,2 percent); housing, water, electricity, gas and other fuels (11,9 percent); alcoholic beverages and tobacco (6,3 percent); restaurants and hotels (4,4 percent) and food and non-alcoholic beverages (3,9 percent).

On a month-on-month basis, inflation declined from 0,3 percent in October 2012 to 0,1 percent in November 2012.

Month-on-month food and non-food inflation stood at 0,2 percent and 0,1 percent, respectively. Education (3,5 percent); and housing, water, electricity, gas and other fuels (0,3) were the main drivers of month-on-month inflation in November 2012.

The African Development Bank Zimbabwe monthly economic review for December 2012 noted that with these inflation figures, Zimbabwe was most likely to meet the annual average inflation target of 5 percent.

Said another economist Mr Takunda Mugaga: "Food inflation especially will remain depressed because disposable income in Zimbabwe is depressed generally and the majority of people are currently living under the Poverty Datum Line.

"Although utilities inflation will likely go up, an analysis of the year-on-year inflation rates shows there has been a very marginal increase over the past two to three years."

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