THE Confederation of Zimbabwe Industries (CZI), the organised manufacturing sector lobby group, says the country remains uncompetitive in the region despite recent economic developments which have resulted in inflation trending downwards.
Official figures show that the month-on-month inflation rate in October 2022 was 3.2%, shedding 0.3 percentage points on the September 2022 rate of 3.5%. Blended month-on-month inflation rate in October 2022 was 3.2%, gaining 0.7 percentage points on the September 2022 rate of 2.5%.
Year-on-year inflation rate for October 2022 decreased to 268.8% from 280.4% in September 2022, shedding 11.6 percentage points. Blended annual inflation rate of October 2022 stood at 108.7%, gaining 1.2 percentage points on the September inflation rate.
Zimbabwe’s month-on-month inflation has been on the decline since its peak of 30.7% in June 2022. According to the CZI, the continuous decline of month-on-month inflation highlights that a cocktail of measures instituted by the authorities are having a positive impact in curbing inflation.
Month-on-month inflation rate in October 2022 was 3.2%, shedding 0.3 percentage points on the September 2022 rate of 3.5%. Single digit month-on-month inflation brings relative stability in the economy, especially if on a sustainable downward trajectory.
“The persistent decline in month-on-month inflation since July 2022 is now starting to trickle down to annual inflation as for the second month in a row, annual inflation has declined. The Zimbabwe annual inflation rate for October 2022 decreased to 268.8% from 280.4% in September 2022, shedding 11.6 percentage points. Although annual inflation is still relatively very high, the decline is a welcome development and if the authorities maintain the tight liquidity conditions, annual inflation will keep dropping,” the CZI said in its inflation and currency developments brief.
“The rest of the world experienced some sort of inflation due to the effects of the Russia-Ukraine war, as well as the effects of the structural challenges due to the Covid-19 pandemic. However, for Zimbabwe this came at a time the country was already dealing with inflation. As the effects of these global geopolitical developments starts to wane, countries are experiencing a decline in inflation. Zimbabwe is no exception as its annual inflation is declining. However, the annual inflation rate for Zimbabwe is still extremely very high compared to its regional counterparts. This still emphasizes the presence of strong endogenous factors that have been driving inflation in Zimbabwe. In the month of September 2022, Zimbabwe’s annual inflation was 15 times higher than Angola, the country with the second-highest inflation in Sadc. The inflationary environment weighs down on Zimbabwe’s competitiveness, as domestic prices of goods end up being higher compared to what low-inflation countries are selling at.”
The CZI says taming of inflation, as well as the sustenance of stability over the past two months has generally shown that the greatest threat to stability is excess liquidity.
“The responsiveness of the parallel market to tightening of liquidity also shows that the parallel market behaviour is largely responsive to liquidity conditions in the economy, as reflected by the growth in money supply,” the report reads.
“This means that the threat to stability are the liquidity pressures that would be expected going forward. The upcoming agriculture season, for example, will require government to support farmers through the various schemes in existence. There is potential for the creation of excess liquidity which can feed the growth on money supply if payments are not carefully calibrated. “The ability to crowd in the private sector, as well as general ability to fund agriculture in a non-inflationary manner will determine the inflation trajectory in the coming months. The upcoming 2023 harmonised elections also have the potential to be a source of money supply growth unless elections are funded from the budget and payments are also carefully calibrated so as not to upset the market.”