Zimbabwe's rocketing inflation rate subsided for the first time in 18 months in December, data released on Tuesday showed, suggesting it could undershoot the government's forecast of 700 percent in the first quarter.
Inflation came in at 598.7 percent in the year to December remaining one of the highest in the world but it had at least retreated from a record 619.5 percent the previous month, the Central Statistical Office said.
This was the first time inflation had slowed since June 2002 when it eased to 114.5 percent from 122.5 percent in May 2002 and came as welcome news in the crisis ridden country where there are shortages of food, fuel and foreign currency - and an unemployment rate of over 70 percent.
"The trend in place now suggests that Zimbabwe has stepped back from the brink of hyperinflation which we define as a month-on-month rate of over 50 percent," said Razia Khan, an economist with Standard Chartered in London.
On a month-on-month basis, the consumer price index increased by 11.2 percent in December compared to November's rate of 33.6 percent.
Zimbabwe is grappling with its worst economic crisis in over two decades, which critics blame on years of post-independence mismanagement by President Robert Mugabe's government.
Mugabe, 80 next month and in power since independence in 1980, denies charges of misrule and argues that the economy has been sabotaged by his opponents in retaliation for his forcible redistribution of white-owned farms among landless blacks.
In his 2004 budget statement in November, Finance Minister Herbert Murerwa predicted annual inflation, which he called the country's number one enemy, would rise to 700 percent in the first quarter of the year before subsiding in response to tighter monetary policy.
The central bank this month introduced bi-weekly foreign currency auctions to boost the flow of money in the formal system and kill a thriving black market where the Zimbabwe dollar dipped to 7,000 against the US dollar in December.
The local unit has since recovered to around 3,800 in muted trade on the informal market, tracking the auction rate where the Zimbabwe dollar firmed to 3,842.01 on Monday from 4,177.16 at the previous sale.
"Retailers had overstocked in Zimbabwe for the festive period in anticipation of ever increasing inflation and a continued depreciation of the exchange rate," said Khan.
"But with the announcement of the new monetary policy the exchange rate stabilised and interest rates temporarily surged. As a result, retailers found they could not sell the goods and were forced to cut prices," she said.
She added the impact of this would obviously be greater in the January numbers, which she predicted would show another slow down in inflation.
Comments
Comments are closed.