'Zim inflation to improve next year'

HARARE - Zimbabwe's annual inflation rate is expected to improve in the last two months of the year from the current negative figures on the back of increased consumer goods demand during the festive season, a local economic think-tank has said.

Zimbabwe Economic Policy and Research Unit (Zeparu) executive director Gibson Chigumira yesterday told guests at the launch of the think-tank’s Volume 18
Economic Barometer that the deflationary pressures on Zimbabwe were going to slow down into 2016.

This comes as 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,” Chigumira said.

The Zeparu boss noted that year-on-year inflation is projected at -1,87 percent in December 2015 while month-on-month inflation is projected at 0,14 percent.

Deflation is a decrease in the general price level of goods and services and it occurs when the inflation rate falls below zero percent (a negative inflation rate).

Figures released by the Zimbabwe National Statistics Agency (Zimstat) last week showed that the annual inflation rate for the month of September 2015 as measured by the all items Consumer Price Index (CPI) stood at –3,29 percent, shedding 0,18 percentage points on the September  rate of –3,11 percent.

The data also showed that prices as measured by the all items CPI decreased by an average of –3,29 percentage points between October 2014 and October 2015.

The month-on-month inflation rate in October 2015 was -0,29 percent gaining 0,07 percentage points on the September 2015 rate of –0,36 percent.

Zimbabwe was driven into deflationary territory in October last year and has remained there with year-on-year inflation for the month of January 2015 standing at –1,28 percent due to sluggish domestic demand and a weak rand.

Year-on-year food and non-alcoholic beverages inflation prone to transitory shocks stood at –4,0 percent whilst the non-food inflation rate was -2,95 percent.

Equities firm IH Securities recently warned that the deflationary spell would remain this year due to persistent weaknesses in the rand, subdued demand and the “price correction” effect.

Meanwhile, Chigumira said while government had taken steps towards tackling deflation, the measures were not poised to immediately take effect and induce positive inflation.

“Government has even reduced imports by removing basic goods from the traveller’s rebate and banning the importation of second-hand clothing and shoes, which will likely impose some level of upward pressure on the inflation rate… However, these are unlikely to be sufficient to ensure that year-on-year inflation moves into positive territory,” he said.

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