Unstable Inflation unsettles the economy

The country’s unstable annual inflation trends over the past nine months have been a concern, for both households and business community.

With inflation skyrocketing from the lows of the central bank’s medium term target to highs of 8.9 percent before dropping to 8.4 percent in September, stability has escaped the economy.

Statistics Botswana ( SB) said the main contributors to September’s annual inflation came from the transport, housing, water, electricity, gas and other fuels, food and non- alcoholic beverages as well as miscellaneous goods and services groups.

The country’s data authority further highlighted that the group indices were generally moving at a stable pace between August and September 2021, recording changes of less than 1.0 percent, except the education group index which recorded 1.0 percent.

Commenting on the latest inflation figures, Motswedi Securities analyst, Garry Juma said the decline in September was mainly due to base effects, as the increases that happened last year in most constituent items, falls away from the calculations.

Despite inflation drop over the past two months, Juma said inflation will continue to break away from Bank of Botswana’s ( BoB) medium term target.

“Our projects are that inflation will close the year above the BoB target range,” said Juma.

Kgori Capital Portfolio Manager, Kwabena Antwi has indicated that inflation is expected to rise again after dropping to 8.4 percent in September, following another drop to 8.8 percent in August from July’s 8.9 percent.

“We expect inflation to rise again in October 2021, due to upward pump price adjustments implemented on 8 October 2021, before continuing to decelerate on account of base effects,” said Antwi.

Antwi said the September decline in inflation was due to slowing in transport inflation which reduced from 20.6 percent in August to 17.5 percent in September.

Meanwhile, the BoB’s monetary policy in August indicated that inflation is projected to be slightly higher in the short term, mainly due to the upward revision in forecasts for trading partner countries’ inflation and international commodity prices, as well as the improvement in the domestic economic activity in the first quarter of 2021 than previously projected.