Inflation: Experts cautiously optimistic

By The NewsDay | Mar. 1, 2021 | 2 Min read

BY MTHANDAZO NYONI ADVISORY firm, IH Securities (IH) says Zimbabwe’s inflation will continue decelerating this year, although the economy will remain under pressure. In its latest macro-economic update, IH said continued fiscal discipline, as explained by the central bank recently, would help the country keep inflation under control. The Reserve Bank of Zimbabwe projected two […]

BY MTHANDAZO NYONI

ADVISORY firm, IH Securities (IH) says Zimbabwe’s inflation will continue decelerating this year, although the economy will remain under pressure.

In its latest macro-economic update, IH said continued fiscal discipline, as explained by the central bank recently, would help the country keep inflation under control.

The Reserve Bank of Zimbabwe projected two weeks ago an annual inflation of about 10% by the end of 2021.

“We believe that in line with the central bank’s sentiments and continued fiscal discipline, inflation will continue to decelerate,” IH said. “However, domestic inflationary pressures will remain under the surface amid shaky market confidence about the current equilibrium and possible lobbying by trade unions for further upward review of civil servants’ salaries,” it said.

IH said a disciplined approach to money supply growth and restrictions on mobile money platforms had all combined to bring a “fragile stability” within the monetary space which has reduced premiums between the formal and parallel market exchange rates.

“We are cautiously optimistic that inflation will remain on a downward trajectory, provided that the discipline displayed in 2020 is repeated in 2021.

“We do, however, expect the country to potentially overshoot the set inflation targets partly due to unpredictable external pressures on domestic pricing,” it said.

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“We remain bullish on consumer names in the equities space as we see an uplift in consumer liquidity and demand this year despite COVID-19 impacts.”

In its monetary policy statement released recently, the central bank maintained limit on mobile banking transactions at $5 000 per transaction and $35 000 per week. It raised the daily cash withdrawal limits for individuals to $2 000 from $1 000.

IH said the Monetary Policy Committee’s decision to maintain the current limits on mobile banking transactions would further prevent speculative activity on the parallel market which is positive for exchange rate stability.