News

2016 inflation closes at remarkable 7.5%

KALUMBI

ESTHER MSETEKA & HENRY SINYANGWE, Lusaka
A SLOW-DOWN in the rate of increase of prices of food and non-alcoholic products has gifted Zambia with a major drop in the rate of inflation from the double digit of 21.8 percent it recorded in January to close the year at 7.5 percent.
And the Economics Association of Zambia (EAZ) says the country’s closing the inflation rate at 7.5 percent is a sign that there is growth.
The country has posted a gross domestic product (GDP) growth of 4.0 percent in the first half of the year.
This is according to latest statistics released by the Central Statistical Office (CSO) in Lusaka yesterday.
Early this year, Government projected that Zambia would return to the single digit inflation rate of about 8.7 percent.
The Bank of Zambia (BoZ), during its monetary policy committee statement for the second quarter update, had projected that Zambia would return to the single digit inflation rate of about 8.7 percent from October to December 2016.
The quarterly GDP at constant 2010 price was estimated at about K63 billion this year compared to K60.4 billion  last  month, representing 4.0 percent fiscal growth in the first half of this year.
The increase in inflation rate in January was attributed to unpredictable economic challenges the country experienced in 2015 while the tremendous drop is attributed to the base effect.
The base effect refers to the impact of the rise in price level in the previous year over the corresponding increase in the price levels in the current year.
Speaking at a press briefing in Lusaka, director of census and statistics John Kalumbi said when compared to last month, as measured by the all-items consumer price index, the inflation rate has reduced to 7.5 percent this month from 8.8 percent recorded in November, representing a drop of 1.3 percent in the period under review.
Mr Kalumbi said of the 7.5 percent annual inflation rate recorded this month, food and non-alcoholic beverages products accounted for 4.1 percent while non-food products contributed 3.4 percent.
“This decrease in the year-to-year inflation does not necessarily mean a fall in prices of goods and services but simply shows a reduction in the rate at which prices of goods and services have increased.
“Year-on-year inflation in December 2015 stood at 21.1 percent then increased to 21.8 percent in January 2016. In February, inflation rate was at 22.9 percent while in November it recorded a single digit dropping to 8.8 percent and closing at 7.5 percent in December 2016,” he said.
Mr Kalumbi said annual food inflation rate stood at 7.8 percent as at this month.
And the Economics Association of Zambia (EAZ) says the country’s closing the inflation rate at 7.5 percent is a sign that there is growth.
The association now expects the BoZ to reduce the monetary policy rate following the country closing the inflation rate at a single digit.
EAZ president Crispin Mphuka said he expects the monetary policy rate not to be overtightened to stimulate growth.
“If the monetary policy rate is loosened a bit, it will allow the economy to have more credit and, therefore, this will stimulate growth,” Dr Mphuka said.

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