Home Business Mangudya Disputes World Bank Inflation Projections For Zimbabwe

Mangudya Disputes World Bank Inflation Projections For Zimbabwe

John Mangudya

Mangudya Disputes World Bank Inflation Projections For Zimbabwe

The governor of the Reserve Bank of Zimbabwe (RBZ), Dr John Panonetsa Mangudya has disputed World Bank’s inflation projections for Zimbabwe.

In the update that reviews developments in 2019 and 2020 and emerging trends in 2021, World Bank country economist Marko Kwaramba said the bank predicted the inflation rate to fall to 86%. He said:

_We have observed the various policies that have been taken and the stability that has been felt, not taking into account what has been happening in the past two weeks or past week, but so far our projection for inflation is 86%._

_Inflation has been slowing as far as we have seen since up to May and we expect that in 2022 inflation will reach around 22%._

However, during a question-and-answer segment, Mangudya disputed the bank’s figures predicting that inflation would fall lower than the Breton Woods institution’s projections. He said:

_In terms of inflation, the 86% that he (Kwaramba) spoke about is quite out of our projections because as the numbers show, in May we had 162%. We expect June inflation of 105% and July to be below 55%. Why? Because of the ‘base effect._

_Our highest inflation was 837% in July 2020 and because of the base effect to suggest that we are going to be 86% by the end of the year is a bit out of projection so you may wish to reconsider the numbers, especially if you talk of July being the highest inflation, last year._

_I am not very sure which model you used as the World Bank, but it may be necessary to look at that figure. We do believe at the end of the year, December, our yearon-year inflation will be between 15% and 22%, but otherwise thank you for the presentation._

Defending the World Bank’s projections, the bank’s senior chief country economist Stella Ilieva said they base their projections on annual average inflation compared to the RBZ’s end-of-year inflation that does take the base effect into consideration. She said:

_One point on the question posed by the governor (Mangudya) on inflation is that what we show is annual average inflation. I think what the RBZ estimates are end-of-year inflation or year-on-year inflation._

_In a way, average annual inflation is affected by base effects, otherwise, we do not have significant differences in how we project monthly inflation rates._

The base effect relates to inflation in the corresponding period of the previous year and using a different reference for comparison can lead to a large variation in ratio or percentage comparisons between data points.

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