Inflation to remain low in 2013
The Central Bank has said inflation will remain low throughout 2013 and fall within the medium term objective range of 3-6 percent later in the year.
Bank of Botswana’s Head of Research, Dr Kealeboga Masalila, told the media this Wednesday that inflation rose slightly in 2012 due to response to fuel prices, higher alcohol levy and public transport fares.
He however asserted that this year, inflation will remain low.
“This is due to projected below trend economic activity and modest growth in disposable income. This year, inflation is projected to remain above the medium term objective range of 3-6 percent and is expected to fall within the range later in the year,” he said.
Reasons inflation remained above the target included the impact of increase in administered prices and government levies.
Dr Masalila said in a press conference, “The hike in administered prices in 2012 cumulatively added an estimated 1.95 percentage points to inflation, with the upward adjustment in fuel prices alone contributing approximately 1.31 percentage points.”
He further explained that the increase in domestic fuel prices went against the falling cost of oil globally because of the delay in responding to previous international oil price increase.
However, global inflation is projected to moderate from 3.9 percent in 2012 to 3.7 percent in 2013 against the backdrop of stable commodity prices.
“Upward pressure on inflation is expected in some emerging market economies, given the robust economic activity and lower rate of unemployment,” revealed Dr Masalila.
Commenting on inflation objectives, Bank of Botswana Governor, Linah Mohohlo, said she sees light at the end of the tunnel for Botswana’s economy considering that later in the year, inflation is likely to fall within the medium term objective range of 3-6 percent.
“While we could not fully achieve this target, we can say we are going somewhere because we are still within a single digit inflation rate,” she commented.
Asked if the Central Bank cannot adjust its inflation objective for the economy to enjoy great benefits of lower inflation rate, Mohohlo said: “Inflation objective is what we have set for ourselves as an economy hoping to achieve the target range of 3-6 percent.
It doesn’t mean that since we haven’t achieved the target over the years we are not doing well.”