Thursday, February 2, 2012

Zimbabwe’s inflation still favourable - Gono

Posted on Wednesday 1 February 2012 - 11:00

Zimbabwe's annual headline inflation still compared favourably with economies in the region, Reserve Bank of Zimbabwe Governor Gideon Gono said on Tuesday, adding that the projected stabilisation of international oil prices this year might also help in lessening price pressures.

But Gono expressed worries over the state of the balance of payments, saying it remained “precariously difficult” at a time when growth in manufactured exports was slow while the country had insufficient foreign currency reserves at its disposal to finance the current account deficit.

He said consumer prices remained low and stable in much of last year and at a rate below 5 percent, within the government’s target band.
Inflation rate accelerated to 4.9 percent year-on-year in December 2011, pushed up by higher food and beverage prices as well as second round effects from communication and utility tariffs, according the latest national statistics agency's figures.
“Zimbabwe’s annual headline inflation compares favourably with regional economies and is aligned with the SADC macroeconomic convergence target of 5 percent,” the central bank chief said in a monetary policy statement.
He warned that the country was exposed to external shocks due to the fragile global economy and decried heavy reliance on commodities, adding that the dampening effect of the Eurozone debt crisis on international commodity prices, Diaspora remittances, and capital inflows will likely have a negative impact on Zimbabwe.
“… declines in global activity and commodity prices will have inescapable consequences for the country’s export earnings, and hence its output, incomes, and fiscal revenues. Diaspora remittances and investment flows are likely to weaken, with knock-on effects on domestic demand, banking sector liquidity and loan quality, resulting in more difficult credit conditions."
Zimbabwe has in recent years struggled to finance its yawning current account deficit, estimated at 23.4 percent of gross domestic product (GDP).
Exports and reserves have remained subdued, while the government had to go cap in hand to the International Monetary Fund (IMF) for support only to be snubbed due to non payment of outstanding arrears.


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