Ecstasy as inflation hits single digit

Tanzania Inflation RateThe year-on-year inflation has hit a single-digit rate of 9.8 per cent for the first time in the last 21 months, signifying a robust economic outlook this year. 
 
The last time the rate was at a single-digit was in June 2011 when it stood at 9.7 per cent.
 
Then it climbed to reach an all-time high figure of 19.8 per cent in December 2011. According to National Bureau of Statistics (NBS), the March headline inflation decelerated to 9.8 per cent down from 10.4 of February supported by declining food prices while prices of non food items increased slightly.

But economists said it was too early to celebrate the single-digit as the rate was yet to be out of the wood while descending at a snail's-pace that failed to bring back the desired outcomes.

The Mzumbe University's Dar es Salaam Business School Senior Lecturer (Economics), Dr Honest Ngowi, told 'Daily News' yesterday that last month the inflation rate was a good figure but "it is too early to celebrate."

"May be we have started the journey to the real single-digit," Dr Ngowi said yesterday. "But we have to have good policy to maintain the rate otherwise the recent bus fare hikes might drag the rate back to the double digit." 

The economist also said that the energy and transport baskets on CPI -- consumer price index -- was still on the high side hence increasing the inflationary pressure on the index.

"The declining trend should also be felt in people's pockets, otherwise it makes no sense," Dr Ngowi said adding that the rate was climbing down at a snail's pace. 

A Tanzania Securities' 'Equity Research on Local Listed Banks' report released last month says the inflation rate was expected to improve persistently this year, but it warned on the possibility of going back to the double digit on the back of high food and energy prices.

"There are some indications that inflation is now bottoming out," the report said. "We are forecasting consumer price inflation to drop into the high single digits in the first quarter of 2013. 

"…But expect inflation to return to double digits in the second quarter (and to) average 12 per cent over the year, significantly above the average of 6.9 per cent over 2000-10."

The document attributed the prediction to increases in food and energy prices which remain relatively contained as the strong momentum in the all items indicates more structural inflationary pressures. 

On other hand, the International Monetary Fund (IMF) has already said the rate was expected to climb down to below 10 per cent at the end of June, this year, on the back of ongoing structural reforms in the fiscal area that will play a crucial role toward medium-term fiscal adjustment.

"(Thus) a slight reduction in the growth of monetary aggregates is expected to bring inflation below 10 per cent by end June 2013," IMF said early this year when answering the country's letter of intent. 

Though the institution acknowledged on its Country Report that the inflation has gradually declined, it has not yet "reached the authority's single-digit objective".

The rate was in a down-climbing-gear since last January after it reached an all-time high in the last 15 years in December 2011 of 19.7 per cent, but in March descending to 9.8 per cent.
Source: The Daily News, www.dailynews.co.tz, reported by Abduel Elinaza
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