Mmegi Online :: Inflation rate to reach BoB target in third quarter
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Last Updated
Tuesday 17 September 2019, 18:10 pm.
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Inflation rate to reach BoB target in third quarter

The annual inflation rate is likely fall within the Bank of Botswana (BoB) medium to long-term target of between 3-6 percent by the third quarter of the year, economist Keith Jefferis has said.
By Staff Writer Tue 17 Sep 2019, 19:15 pm (GMT +2)
Mmegi Online :: Inflation rate to reach BoB target in third quarter








In the first quarter economic review of BIFM, Jefferis who is chairman of the financial institution's investment committee said that the annual inflation rate will go down because the consumer price index is expected to continue falling steadily throughout the year. He said the inflation level will fall below six percent - the upper end of central bank's target - by August.

He predicted that the figure will remain around the 5-6 percent level for the remainder of the year.When oil prices were spiralling last year and driving up inflationary pressure, the central bank abandoned short term inflation targeting and adopted a medium to long-term objective of 3-6 percent. Last month the annual inflation rate stagnated after a five-month decrease. The annual inflation rate remained unchanged at 11.7 percent largely due to the stabilisation of oil prices on the international market.

In response to weakening inflationary pressures, the bank reduced the bank rate last Tuesday by another 100 basis points to 13 percent, bringing cumulative rate cuts to 250 basis points since December.

BoB said in a statement that although inflation still remained above its objective of three to six percent, the outlook is favourable in light of decreasing global and local economic growth.Because of the global economic crisis, Jefferis, who is also a former central bank deputy governor, said that the expected fall in inflation rate is just about the only positive economic development that will happen to Botswana this year.

Looking

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at economic growth figures, the BIFM report said that the 2009 forecasts are much gloomier than 2008 because of negative growth in the mining sector. "The decision to close all of the diamond mines for several months, and to keep two of the mines closed until the end of 2009, will have a major negative impact on GDP growth. We estimate that GDP will contract by around 16% in 2009. Although there should be positive growth in 2010 as the mines re-open, we estimate overall real growth will only average around 1-2 percent a year over the period from 2009 to 2011, well below recent average growth rates. This illustrates that the global crisis will have a negative impact on Botswana well into the medium term," said the report. Jefferis said that diamond production is likely to recover next year after the expected fall of around two-thirds in 2009. The value of production and exports should approach more 'normal' levels in 2011, but up to 2013, it is projected to remain below the peak seen in 2007. "But perhaps the most striking point is that the steady growth in diamond production that occurred between 1998 and 2007 looks to have come to an end, which has major implications for government revenues in the medium term.

"In particular, mineral revenues are likely to grow more slowly than the economy, and therefore account for a declining share of GDP," said Jefferis.

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