Africa-Press – Botswana. Headline inflation has decreased significantly from 4.6 per cent in June to 1.5 per cent in July, breaching the lower bound of Bank of Botswana’s (BoB) medium-term objective range of 3 – 6 per cent.
Briefing the media in Gaborone yesterday, BoB Governor, Mr Moses Pelaelo said the fall in inflation was mainly due to dissipating impact of the earlier increase in domestic fuel prices in the corresponding period in 2022.
Furthermore, he said inflation fell on account of the downward adjustment in domestic fuel prices effected on June 21, citing that inflation was forecasted at 1.2 per cent for August.
Mr Pelaelo said Monetary Policy Committee (MPC) projected that inflation would remain below the lower bound of the objective range temporarily and revert to within the objective range from the first quarter of 2024 into the medium term.
“The projected low inflation is due to among others, subdued domestic demand and the downward revision in recent forecasts of international food prices and trading partner countries’ inflation,” he said.
Mr Pelaelo said the risks to this inflation trajectory were assessed to be balanced, mentioning that the MPC observed that inflation could be higher than projected if international commodity prices increased beyond current forecasts, supply and logistical constraints persist.
Moreover, he said any possible upward adjustment in administered prices that was not factored in the current projection could lead to higher inflation.
However, he said inflation could be lower than anticipated because of the possibility of weaker domestic and global economic activity, possible disinflationary effects of higher monetary policy rates globally, stronger-than-anticipated appreciation of the Pula against the South African rand, and restrained international commodity prices.
Mr Pelaelo said according to the July 2023 World Economic Outlook Update, global output growth for 2022 was estimated at 3.5 per cent and was forecasted to moderate to 3 per cent in both 2023 and 2024.
He reiterated that South African real gross domestic product (GDP) grew by 1.9 per cent in 2022.
“The South African Reserve Bank expects growth to weaken to 0.4 per cent in 2023 but to improve to 1 per cent in 2024.”
For Botswana, Mr Pelaelo indicated that real GDP increased by 5.8 per cent in 2022, lower than 11.9 per cent recorded in 2021.
“The Ministry of Finance projects GDP to grow by 3.8 per cent and 4.4 per cent in 2023 and 2024, respectively,” he said.
Meanwhile the BoB governor said MPC of the local bourse maintained the Monetary Policy Rate at 2.65 per cent.
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