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Inflation estimates near recession-era levels

Inflation estimates near recession-era levels
Inflation estimates near recession-era levels

Estimates for consumer price increases are at their lowest since the country’s 2008 recession.

This is due to a collapse in commodity markets, counterbalancing the recent revival of diamond sales and reigniting the threat of deflation.

The annual inflation rate for March 2017 was 3.5 percent, an increase of 0.1 from February. The expectation is that April 2017 will show a similar upward trend, as has been the norm in the past six months.

Group indices were generally stable between February and March, recording changes of less than 1.0 percent with the exception of transport, which registered a change of exactly 1 percent.

This increase has been attributed to the rise in retail pump prices for petrol and diesel by P0.20 and P0.25 per litre respectively, which came into effect on the 4th of March.

It is the most pessimistic outlook since October 2016, when the economy was in the midst of its contraction due to the poor performance of copper, gold and other base metals on the commodity markets.

An increase of the transport index group coupled by the poor performance of base metals ignited the closure of BCL Mine and its subsidiary in Tati Nickel Mining Company (TNMC), as sales struggled at international markets.

“A global whiff of disinflationary pressures have gave a rise in the annual inflation to 3.5 percent during the month of March 2017 just above 0.1 percent shy of the 4.6 percent registered in September 2014,” said Maria Molebatsi, an economic strategist with the Francistown City Council (FCC).

Molebatsi added, “The upward trend of inflation that the country has been witnessing in the past six months clearly shows that inflation is nearing the recession-era levels due to unending changes in the fuel sector. It can only be offset if the improvements in the diamond sector is anything to go by and sustainable.”

According to Molebatsi, deflation, or a sustained drop in prices, is dangerous for an economy because consumers often hold off making purchases, which adversely effects on growth and wages. She further warned the development was not good for Francistown’s economic revival plans.