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Thandeka Moyo, Business Reporter
INFLATION is projected to increase to 1,1 percent next year due to the anticipated increase in energy prices amid expectations that it will close this year at 0, 4 percent.
In its 2017 Pre-Budget Strategy Paper, Treasury said inflation will end this year at below zero percent due to a strong United States dollar.
“In terms of prices, persistence of deflationary conditions is expected to year-end, with annual average inflation projected at around -0.4 percent in 2016, sustained by a strong US dollar and limited aggregate demand. However, in 2017, inflation is projected to slightly increase to 1,1 percent, owing to anticipated increase in energy prices, as well as projected gradual rebound in aggregate demand,” said Treasury in its pre-budget paper.
Treasury also said economic growth for 2016 is projected at 1, 2 percent, down from the original projection of 2, 7 percent.
Preliminary growth projections for 2017 are pegged at 4, 8 percent.
Treasury said the 2017 growth projection is anchored on the following assumptions: normal to above normal rainfall pattern supporting a favourable agricultural season; improved agricultural financing; incentives for exporters; moderate improvement in international commodity prices as well as an improved investment environment benefiting from the ongoing Ease of Doing Business Reforms.
Also seen as contributing to the growth was the successful re-engagement with International Financial Institutions (IFIs) and positive gains from the various facilities for the productive sectors supported by implementation of SI 64 of 2016, which seeks to provide an even playing field for industries from unfair competition posed by some imports.
According to the paper, the economy displayed resilience during 2016 under a difficult economic environment, characterised by severe drought and liquidity challenges, among others. — @thamamoe
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