BY MTHANDAZO NYONI
ZIMBABWE’S annual inflation, in a best case scenario, is projected to close the year at 62,17%, driven by persistent food inflation, researchers at Inter Horizon Securities (IH) have said.
In a worst case scenario, the annual inflation rate is expected to be at 95,04% by year-end, IH’s equity strategy research show.
The central bank projected the country’s annual inflation rate to end the year at between 25% and 35%.
Annual inflation closed the year 2021 at 60,74%, significantly lower than the December 2020 annual inflation rate of 348,59%.
A blend of factors contributed to this decline.
The Dutch foreign currency auction system introduced by the Reserve Bank of Zimbabwe (RBZ) in 2020 continued alleviating foreign currency shortages, thus reducing increases in costs of production.
Commendable fiscal discipline was observed during the period under review with the government prioritising production and manufacturing initiatives.
- Chamisa under fire over US$120K donation
- Mavhunga puts DeMbare into Chibuku quarterfinals
- Pension funds bet on Cabora Bassa oilfields
- Councils defy govt fire tender directive
Keep Reading
The monetary policies implemented during the same period managed to stimulate the economy while at the same time controlling price increases.
Although annual inflation registered a decent decrease in December 2021, relative to December 2020, IH said it was still higher than the desired levels.
Inflating highest in the CPI basket is the transport segment. This could be on the back of high oil prices experienced in 2021 globally, it said.
Moving into 2022, the month-on-month inflation rate shed 0,42 percentage points from the December 2021 rate of 5,76% to 5,34% in January 2022.
“We are of the view the government will maintain fiscal discipline and the central bank will continue using monetary policy as a tool to stabilise the economy,” the researchers noted.
Through its Monetary Policy Statement, RBZ maintained a hawkish stance on money supply, at least in the short-term.
In October 2021, the RBZ increased bank policy rate from 40% to 60% and the medium-term bank accommodation (MBA) facility interest rate from 30% to 40%.
Of concern is the COVID-19 global pandemic, IH said.
IH said although the government had secured enough vaccines to achieve herd immunity, the country was not immune to global inflationary pressures which arise from supply chain disruptions.
“Apart from importing inflation, the disparity between the interbank exchange rate and the parallel market rate has potential to drive prices as businesses continue to peg their prices using parallel market rate,” it said.
“We also forecast 2021/22 agriculture output to come in lower compared to the previous year owing to late continuous rains.
On this background, we anticipate persistent food inflation. Based on the aforementioned factors, we anticipate inflation rates to remain high in 2022,” researchers said.
- Follow us on Twitter @NewsDayZimbabwe
