Tanzania’s inflation fell to 6.7 per cent in the year to August from 7.5 per cent in July due to slow pace of commodity prices, and the year on year rate of inflation in East Africa’s second largest economy has now fallen in the last 18 of 19 months.
“The main reason has been lower food inflation. It doesn’t mean to say that prices have necessarily fallen but it does mean that the annual price rise has been less than before. What we have seen in Tanzania’s case has obviously been that they are still recovering from a drought in 2011 and as a result prices were fairly high back then,” Absa Capital Africa strategist Ridle Markus told CNBC Africa.
“So there is some positive output on the food front coming through and that you can see in the lower food inflation. So food inflation has dipped below seven per cent there.”
In Mozambique, headline consumer slowed further in August to 4.34 per cent from 4.58 per cent in July.
Mozambique suffered severe housing and food crop damage due to floods at the beginning of the year, but there has however been a recovery in food output ever since. Food inflation is substantially lower as a result of the recovery. The stable currencies of both countries have also buoyed imported food prices.
“On a transport side, there has been some pressures. In Tanzania we saw an increase in fuel prices last month but that didn’t seem to have too much of an impact on inflation in Tanzania. In Tanzania’s case inflation is probably likely to fall even further from the current level of 6.7 per cent,” Markus explained.
“There’s going to be some new pressures coming through early next year and the oil price situation is also something to look at, depending on how issues in the Middle East unfold. We could potentially see oil prices coming back as a major threat and also currencies coming under pressure.”