Zimbabwe Inflation Forecast for 2022

Zimbabwe Inflation Forecast for 2022

Given that we are moving into the 2022 salary increase cycle, several of our payroll clients with operations in Zimbabwe, have asked that we gaze into our inflation crystal ball, to provide a forecast of average inflation for 2022.

Our average inflation forecast for 2022 is 69% and expect inflation to end the year at 60%. The month-to-month forecasts are enumerated in the graph below:

Zimbabwe Inflation Rate

Historic data Axiomatic forecast
This is significantly higher than the Central Bank’s forecast that inflation will end 2022 between 25% to 35%. Our higher forecast is predicated on two primary driving factors:
In fact, our worst-case scenario is significantly higher than the forecast but has been mitigated by the following factors:

We anticipate that the Central Bank will continue to employ tight monetary policy to temper inflation. In October 2021, the Bank increased the bank policy rate from 40% to 60% and the medium-term bank accommodation facility interest rate from 30% to 40%.

Governor John Mangudya recently stated that “If we see inflation going up in February and in March, brace up for very high-interest rates… There is a trade-off between inflation and high-interest rates, all central banks are tightening monetary policies so that we can get out of high inflation,”

Concomitantly, we do believe that the bank rate and accommodation facility rate will be increased if runaway inflation materialises.

The weekly forex auction has been pronounced a failure because it only satisfies 30% of the formal currency transaction requirement. Nevertheless, it is a transparent auction which does set a “market” exchange rate; albeit at a rate of ZWS$ 124 versus the parallel market rate of ZWS$ 220 to 250. We are hoping that the auction amount is increased over the course of 2022 and perhaps more importantly, that the parallel market premium stabilises.


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