Whither Zimbabwe’s food inflation?

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HARARE – Zimbabwe’s month-on-month Food and Non-Alcoholic Beverages inflation rate stood at 37,99 percent in July 2020, gaining 0,26 percentage points on the June 2020 rate of 37,73 percent.

This was ahead of the month-on-month non-food inflation rate at 33,76 percent, gaining 6,15 percentage points on the June 2020 rate of 27,61 percent.

The food inflation was ahead of overall month-on-month inflation rate in July 2020, which was at 35,53 percent gaining 3,87 percentage points on the June 2020 rate of 31,66 percent.

The food inflation was primarily underpinned by significant uptick in bread and cereals where inflation reached 35,6 percent; meat (45,25 percent); sugar, jam, honey, chocolate and confectionery 45,79 percent; and vegetables 39,48 percent.

Food inflation is expected to remain elevated according to developments in neighbouring South Africa, Zimbabwe’s major source of food products.

This could be in form of import inflation, which is due to increase in the prices of imports.

According to Wandile Sihlobo, chief economist of the Agricultural Business Chamber of South Africa (Agbiz), South Africa could see a further uptick in food price inflation, although probably mild, in the coming months.

In a note, Sihlobo says the major driver to food inflation in South Africa are commodity prices for the 2019/20 harvest that have remained astonishingly high for a year where there is a bumper crop.

Other major food inflation drivers, according to Sihlobo include strong demand from the Southern Africa region and deep-sea markets, the delay in maize deliveries due to the late start of the season, and the weaker Rand.

“If prices remain at these levels for a month or so, we could start seeing an upturn in grain products price inflation towards the end of the year (keeping in mind the lag between commodity prices and food price inflation),” Sihlobo noted.

He said the upside risks to South Africa’s food price inflation have now increased than the past few months.

July 2020 data already provides evidence to this point, as this food category was amongst the key drivers of South Africa’s food price inflation during the month.

Maize prices have been steady at fairly higher levels for some time, which again supports the view that this adds to upsides risks to food price inflation.

Zimbabwe has South Africa as one of its major sources of maize imports.

However, prices in Zimbabwe were largely high because of foreign exchange rate issues and might still come down depending on developments on that front.

With the foreign currency exchange rate seemingly stabilising, the prospects of a decelerating rate of price increases might improve from this month, but the changes from now will have to be dramatic if the Government’s year-end lower inflation forecast is to be achieved. – Herald