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BizDay Zimbabwe

March Inflation down 0.22pp on strength of weak rand

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Harare, April 17, 2013 – The year-on-year inflation for March 2013 shed 0.22 percentage points on February 2013 to close the month at 2.76%.

This can be attributed to the weakening South African Rand vis a vis the USD and the relatively low domestic demand.

According to statistics from the Zimstat, the month on month inflation was 0.21% compared to 0.95% for February a negative variance of 74 basis points.

The year-on-year Food and Non-Alcoholic beverages inflation stood at 4.18% whilst the non-food inflation rate was 2.04%.

The month on month food and non-alcoholic beverages inflation stood at 0.32% in March shedding 1.08% on the February rate of 1.4%. The month on month non-food stood at 0.15% compared to 0.72% in February.

In our view, inflation will continue on a downward spiral owing to the weakening of the Rand against a basket of hard currencies.

“The close relation between the performance of the rand and metal prices on the international markets will put pressure on the rand against other currencies and we don’t expect a quick recovery from metal prices hence the rand will be depressed for a while,” noted market analysts to Biday on Wednesday.

“Although the trade deficit of the South African economy decreased in the last quarter we expect it to widen given the poor performance of metals on the world market thus the rand will weaken.

“On the other hand the weakening of the rand will make South Africa a cost effective production centre compared to Zimbabwe thus companies will have an incentive to produce from South Africa than Zimbabwe thus making the country a net importer of manufactured goods.”

“The unbalance trade equation between the two countries will be difficult to equalise as long as Zimbabwe is using a currency which is strong than the country where it imports most of its consumables from and the Zimbabwean government does not have the ability to print money to control its currency.”

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