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