François Kanimba, the Central Bank Governor has said that prices of goods and services are expected to remain stable in the year.
Speaking to Business Times in a phone interview on Monday Kanimba said, “though we do not have updated figures for June, based on market observations prices have been stable. We also expect inflation figures to be stable.”
According to the Consumer Price Index (CPI) prices of goods and services were expected to remain stable and low in the first half of this year in the range of 4 percent.
The inflation rate has also been falling since December last year, with the average inflation rate falling to 10.3 percent from 15.4 percent in 2008.
Last month the country’s year-on-year inflation rate eased to 0.32 percent in May from 0.64 percent in April according to the National Institute of Statistics.
Kanimba observed that the changes in the prices of goods and services as shown by the CPI are expected to continue fluctuating between 4 and 4.5 percent.
For this year government is envisaging an inflation rate in the range of 6.4 percent. According to the Governor, this year’s low inflationary pressure is expected to enhance economic growth, with the economy expected to expand by 7 percent this year.
Last year real Gross Domestic Product (GDP) growth declined to 5.5 percent after a high growth of 11 percent in 2008 on account of the impact of the financial crisis and global recession on the economy.
“The performance of the economy has greatly improved this year and we expect growth to be much higher than last year. For instance in the service industry average growth should be higher than 20 percent,” Kanimba said.
He also noted that the export sector has maintained a steady recovery with the value of exports expected to go up by 25 percent this year.
Specifically, the governor pointed out that for this year performance is expected from the traditional exports of Coffee, Tea and Tin (mineral).
Last year industry and services underperformed growing by only 1.1 percent and 4.3 percent respectively down from 16.3 percent and 11.5 percent in 2008. This was mainly attributed to fall in global demand and tightening banking system conditions.
The Central Bank has said it will continue to increase the supply of money in the economy as long as inflation remains stable and low.