Finance Minister, Mthuli Ncube had to trim his economic growth forecast for 2022 to 4.6% from his previous 5.5% during the Mid-Term Budget Review, citing numerous factors that continue to impede Zimbabwe's economic growth. These factors include uncertainty in the prices of goods and services, low investment, high inflation, and numerous exchange rates. With covid-19 still in our midst and the current conflict between Russia and Ukraine, erratic rainfall, power shortages and pricing pressures have further weakened the Zimbabwean economy.
According to the International Monetary Fund, Real Gross Domestic Product (Real GDP) growth for Zimbabwe is expected to decline to about 3.5% by year end reflecting a slowdown in agricultural and energy outputs owing to erratic rains and rising macroeconomic instability, amidst a recovery in mining and tourism. Uncertainty remains high, however, and the economic outlook will depend on the evolution of external shocks, the policy stance, and implementation of inclusive growth-friendly policies.
EXCHANGE RATES
Interest Rates in Zimbabwe remained unchanged at 200 % in September 2022, the high interest rates have resulted in an increase in the cost of borrowing thus reducing aggregate demand. The auction rate as of 21 October 2022 was sitting at ZWL$629.5204 per 1US dollar. There has been a recent stabilisation in the exchange rates but the prices for basic goods and services still remain highly elevated. The Reserve Bank of Zimbabwe's monetary policy, which was released on 11 August 2022, has caused the stabilisation of exchange rates. Mid-Term Monetary Policy Statement aims to eliminate the gap between the auction and the willing-buyer willing-seller exchange rates; thus, we expect the auction and interbank rates to continue to increase and further align, reducing the gap with parallel market rates.
INFLATION
Consumer Price Inflation (CPI) is a measure that examines the weighted average prices of primary needs such as transportation, food, and medical care at the consumer/retail level. Currently, Zimbabwe’s annual consumer price inflation decreased to 280.4% in September of 2022, from 285% in the month of August 2022, which was the highest since February of 2021. Although the inflation rate has eased, Zimbabwe remains with the highest inflation rates. The recent stability in prices of basic goods and services, which have seen some commodities such as fuel and cooking oil continuing to fall was attributed to the adoption of Mid-Term Monetary Policy by the Government and the Reserve Bank of Zimbabwe. On a monthly basis, consumer prices rose by 3.5% in September 2022, the least in over a year, after a 12.4% surge in August 2022.
COST OF LIVING
According to the World Food Programme (WFP) report review, the cost of basic food basket in ZWL$ terms decreased by 5% month-on-month for the month of September 2022, but for the year-on-year it increased by 493% in the urban areas. The Food Basket as measured by the Consumer Council of Zimbabwe decreased by ZWL6, 780.50 from ZWL115, 607.40 by end of July 2022 to ZWL108, 868.90 by the end of August. There has been a stability in the pricing of basic commodities, however, price changes remain high and continue to present challenges for the vulnerable households whose income is mainly in ZWL. The cost of living for a low-income urban earner monthly basket for a family of six decreased with 1.22% from end of July 2022 to August 2022. There has been a decrease in the cost of living owing to the stability in the parallel market.
FUEL PRICES
