The country’s month-on-month inflation inched up from 5.34% registered in January 2022 to 7.0% in February driven by an uptick in the parallel rate premium which has fueled increase in prices of goods and services. The y-o-y inflation for the month of February 2022 stood at 66.1% versus a y-o-y inflation of 60.6% registered in January 2022. Apart from experiencing inflationary pressures emanating from benchmarking or indexation of prices of goods and services at the parallel market exchange rates, the country has also been importing global inflation.
With the current Russia-Ukraine war crisis going on, we expect global inflation to continue soaring steered by an increase in oil prices. Russia accounts for 12% of the world's oil production and the ongoing war crisis has already triggered an uptick in global prices with U.S. crude oil reaching a 13-year high price of US$130 per barrel. Local blend prices have surged from $1.44 in January this year to $1.51 driven by the aforementioned global developments. Wheat price is also likely to take an upward trend in view of the fact that Ukraine and Russia accounts for 26% of the world’s wheat exports. On this background, we are likely going to see further inflation uptick on the global front.
Within our borders, we expect the importing of global inflation to persist. We also expect our import bill to grow owing to the increase in wheat and oil prices. The effects of Russia-Ukraine war crisis are also likely going to negatively impact the Zimbabwe’s fiscal position. There is increased pressure for government to subsidize fuel and wheat so as to keep local inflation under a leash, resulting in increased government spending.
In light of the expected economic landscape, characterized by increasing inflation, we expect the ZSE to maintain its role as both a currency and inflationary hedge despite demanding valuations. We encourage investors to be highly selective on stock picking, potentially waiting for temporary weakness/profit taking to accumulate into quality names.
