Expected fuel hike to push inflation up

Restaurant and Hotel Group index up by 0.4 percent, expected to rise further

Experts have warned that the price hike on petrol and diesel rumoured to be looming could have a knock on effect on the Restaurant and Hotel group index.

The group currently stands at 107%, having risen 0.4% over the June-July period.

According to Public Finance Expert at the University of Botswana, Professor Emmanuel Botlhale, this already high figure would likely rise again in the event of an increase in fuel prices.

Professor Botlhale was responding to questions from Voice Money on the July 2018 Statistics Botswana Consumer Price Index statements.

The statement continues that despite the increase in the Restaurant and Hotel group index, the Food and Non-alcoholic Beverages group index registered a 0.2% decline moving from 109.2 to 109.0 during the same period, a welcome development according to Botlhale as the price of food had always been slightly high.

Breaking down the figures for Voice Money, the Public Finance Expert explained that the price index for Restaurant and Hotels group was likely caused by May’s fuel price increase.

“This is due to inflation-causing factors that are specific to the sector – some are demand-pull driven while others are cost-push driven,” he said, explaining that cost-push driven factors are when sellers respond to rising costs by increasing the prices of their products and services.

“Given the recent fuel prices, the cost of importing goods (food, in this case) has slightly increased, thus restaurants and hotels are experiencing rising costs,” he said, continuing that the increase is then transferred to the consumer.

Speaking on the implications the increase might have on the economy, the Professor said, “In the final analysis, a sector-specific inflationary occurrence has the effect of working itself into the total inflation basket. That is, total inflation may rise if this sector has a big weight in the inflation basket.”

On the issue of the 0.2 decrease of the Food and Non-alcoholic Beverages group index, Botlhale explained that the drop was mainly attributed to the decrease in the major section indices, notably vegetables (0.8%) and bread & cereals (0.5%).

“Given the relatively big weight of food inflation in the total inflation basket, the decline has the effect of keeping the inflation rate within the 3%-6% band,” he noted.

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