Inflation projected to rise as govt tackles deflation: Zeparu

By The NewsDay | Jan. 13, 2016 | 2 Min read

THE Zimbabwe Economic Policy Analysis and Research Unit (Zeparu) projects that inflation is set to start rising as government has taken action to tackle deflation by putting in place measures to reduce imports.

BY TARISAI MANDIZHA

According to the Zeparu Economic Barometer report, Zimbabwe continues to have the lowest inflation rate in the region, but the forecast shows that inflation was set to start rising.

“Zeparu has developed a model to project future inflation trends, based on the past inflation trends. The model projects that in the fourth quarter of 2015, both year-on-year and monthly inflation will deviate from its downward trend, rising by 1,24 percentage points and 0,50 percentage points respectively from the levels recorded in September 2015. Thus year-on-year inflation is projected at -1,87% in December 2015 while month-on-month inflation is projected at 0,14%,” Zeparu said.

Dollars

“The government has taken action to tackle deflation. For example, it has put in place measures to reduce imports by removing basic goods from the travellers’ rebate and banning the importation of second-hand clothing and shoes. This is likely to impose some level of upward pressure on the inflation rate, as these were exerting high levels of competition on domestic producers. However, they are unlikely to be sufficient to ensure year-on-year inflation moves into positive territory.”

Zeparu said the decline in inflation since the beginning of 2015 was underpinned by tight liquidity conditions, weak consumer demand and the appreciation of the United States dollar against the currencies of Zimbabwe’s major trading partners, especially the South African rand, which continues to be an issue of major concern.

The inflation trend showed that in July, the year-on-year inflation rate was -2,77% and by September, it had fallen to -3,11%.