Inflation slows to all-time low
Brian Benza | Wednesday February 17, 2016 18:00
The decrease was mainly driven by the transport sector with the drop in fuel prices slowing the rate of price increases.
The December inflation is the lowest rate recorded since Botswana adopted the pula currency in 1976, with the previous lowest registered in March 2015 at 2.8 percent.
“Annual inflation in January 2015 was lower than the 3.6 percent recorded during the same month in 2015.
“The slowing pace of the annual inflation rate between January 2015 and January 2016 was mainly due to the decline in prices of commodities in the main component of Transport,” said Statistics Botswana. The inflation decline does not signal a fall in prices, but indicates a general slowdown in the rate at which prices increase.
Group indices were generally stable between December 2015 and January 2016, recording changes of less than 1 percent, except education, which recorded a change of 3.5 percent.
The education group index recorded an increase of 3.5 percent from 169.8 in December to 175.7 in January.
According to the Bank of Botswana (BoB), low domestic demand pressures and subdued foreign price developments contribute to the positive inflation outlook in the medium term.
“This outlook is subject to downside risks arising from sluggish global economic activity and the resultant weakening commodity prices.
The inflation outlook could, however, be adversely affected by any unanticipated large increase in administered prices and government levies as well as international oil and food prices beyond current forecasts,” said the BoB after the December Monetary Policy Committee (MPC) sitting.
While oil prices have remained at low levels, the biggest threat to inflation in Botswana is the prevailing drought, which is pushing up food prices.
Botswana is set to feel the pinch of higher food inflation as the price of some fresh produce in South Africa has doubled in the past few months, with other items soon to follow suit as the drought effects widen.
The country, which imports over 70 percent of its food requirements from South Africa, is likely to record similar price increases, although the depreciating rand might temper the rate of increase for Botswana imports.
Over 80 percent of Botswana’s fresh produce is imported from South Africa while local millers import 95 percent of their maize requirements from the southern neighbours.