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Interest rate to reach 240% in 2023



A United Kingdom-based research firm sees Zimbabwe’s central bank raising interest rates to 240% in 2023 as the authorities battle to tame high inflation.


Fitsch Solutions says 2023 holds a downbeat outlook for the consumer in Zimbabwe. The research firm says while it forecasts real household spending to maintain a positive level, slightly above the 2022 level, triple digit inflation, severe currency instability and soaring interest rates will impact both businesses and consumers.

“Our country risk team also forecast the Reserve Bank of Zimbabwe (RBZ) to hike its policy rate by a further 2 000 basis points to 220% by the end of 2022. Elevated inflation, partly due to Russia’s invasion of Ukraine, and the ongoing depreciation of the Zimbabwe dollar on the black market will prompt a hawkish stance by the RBZ,” Fitch says in its research note titled Zimbabwe 2023 Consumer Outlook: Inflation And Instability Adding To A Downbeat Outlook.

“With inflation remaining sticky for longer, and the risk of rapid growth in money supply in the run-up to general elections in 2023, it is likely the RBZ will raise their policy rate further, to 240% in 2023. Higher interest rates, as well as continually high unemployment over 2023 paint a bleak picture for the state of the Zimbabwean consumer.”

Inflation in Zimbabwe climbed to a year-high level of 285% year-on-year in August 2022, but has since started trending downwards (inflation was recorded at 280.4% and 268.8% in September and October 2022 respectively).

“That said, triple digit inflation makes the general environment for consumers highly unstable. Our country risk team forecasts inflation to average 175% year-on-year for 2022, before growing to average 194% year-on-year over 2023,” Fitch says.

“Inflation will average lower over 2022 due to the more moderate levels seen in H122 [first half of 2022]. However over 2023, we see triple digit inflation above 200% year-on-year persisting over H123. Inflation is forecasted to ease over H223 [second half of 2023], and as such, our country risk team forecasts inflation to end 2023 at 55% year-on-year. This severely elevated level will continue to pose major headwinds. Furthermore, with widespread poverty, rising fuel and food prices will force consumers to prioritise these essentials and in many cases, rely solely on subsistence farming for food supply.”

On the upside, Fitch forecasts the ramp-up in government spending in the run-up to 2023 elections to provide some tailwinds for growth, while an uptick in remittance inflows will provide some relief to a strained consumer base.

“We forecast a muted level of real household spending growth in Zimbabwe over 2023, coming in at 1.7% year-on-year,” the report reads.

“The country’s triple digit inflation, stemming from global supply chain bottlenecks, currency instability and rising fuel and food prices, is weighing heavily on consumer purchasing power. We forecast real household spending (at 2010 prices) to rise from US$6.6bn in 2022, to a slightly higher US$6.7bn over 2023, and will remain higher than the pre-pandemic level of US$6.2bn over 2019.”

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