Inflation set to cool
Mbongeni Mguni | Tuesday June 20, 2023 06:00
The central bank has a medium-term objective range for inflation of three to six percent, which it considers conducive for economic growth and stability in the country.
However, prior to May, inflation was last within the objective range in April 2021, as the impact of increases in various taxes and levies as well as frequent hikes in administered prices such as fuel, pushed the cost of living to 14-year peaks in August 2022.
On Thursday, Statistics Botswana announced that annual inflation or the rate of increase in the prices of goods and services, slowed to 5.7 percent in May, from 7.9 percent in April.
The main contributors to the decrease were softer food and transport prices, the latter linked with fuel prices or more specifically, the absence of fuel price increases in May, when compared to the corresponding month last year.
Separately, the BoB said inflation was expected to remain within the three to six percent objective range going into the medium-term, due to easing price pressures and base effects.
In the calculation of annual inflation, base effects relate to inflation in the corresponding period of the previous year, which if abnormally high, distorts the measurement of inflation in the current period.
A month or period in which inflation spikes may produce the opposite effect a year later, essentially creating the impression that inflation has slowed. “The projected decrease in inflation is due to, amongst others, absence of upward adjustment of administered prices, subdued domestic demand, projected appreciation of the pula against the South African rand and zero rating of a select number of items from Value Added Tax,” central bank governor, Moses Pelaelo told journalists on Thursday.
He, however, said there were upward risks to the inflation outlook which include international commodity prices increasing beyond current forecasts, persistence of supply and logistical constraints, as well as the reversal of global economic integration, specifically geo-economic fragmentation.