Inflation eases to 13.1%

The rate of increase in the prices of goods and services declined marginally in October, as annual inflation eased to 13.1% from 13.8% in September. Figures released by Statistics Botswana this week indicate that the drop was associated with lower costs of transport. However, it is unclear whether the inflation calculation for October incorporated the average P1.24 decrease in petrol and diesel prices effected on October 27. While the latest level of inflation is the lowest seen since June this year, it still represents a 14-year high, underlining the cost of living crisis most consumers have experienced this year. Apart from April, inflation has stayed in the double digits since the beginning of the year, driven largely by higher food and fuel prices due to Russia’s invasion of Ukraine and COVID-19-related global supply constraints. The Bank of Botswana expects inflation to gradually begin declining and eventually return to the three to six percent objective range by the third quarter of 2024. Local firms are, however, not as optimistic as a recent survey by the central bank showed that their inflation expectations have risen. Local firms expect inflation this year to average 12.5%, and decline to an average of 10.5% next year, an ominous sign that interest rate hikes by the central bank are not having their desired impact of reducing inflation expectations amongst businesses. In the first quarter of the year, local businesses expected inflation to average 8.3 percent this year. In contrast, a survey in the second quarter showed that the expectations had moved to 8.5 percent.