Tanzania: Inflation Drop Strengthens Regional Economic Growth

THREE East African member states of Tanzania, Uganda and Kenya have registered a falling inflation rate in the year ending January 2020, signaling stability of prices of goods and services.

Maintaining low and predictable inflation rate is important as it supports the region's efforts geared at

attracting more investments.

The National Bureau of Statistics (NBS) said in its latest report released on Monday this week that the speed of price change for commodities in January had decreased compared to the speed of price change recorded in the preceding month.

In Tanzania, annual headline inflation rate for January decreased to 3.7 per cent from 3.8 per cent recorded during the corresponding period in December 2019.

The Uganda Bureau of Statistics reported 3.4 per cent inflation in January from 3.6 per cent in December, while Kenya National Bureau of Statistics reported a slight inflation decrease of 5.78 per cent from 5.82 recorded in the previous month.

The outturn of inflation, according to the Bank of Tanzania (BoT) Monetary Policy Statement February 2020, was supported by prudent monetary and fiscal policies, stability of the exchange rate, moderate oil prices in the world market and adequate supply of food in the country.

Low and predictable inflation rate is an indicator for stability that contributes greatly to the confidence of people and businesses for making investment decisions.

Stable and low inflation in the EAC member states is good news for investors and consumers in their quest to increase long term investment and purchasing power.

Since high and unpredictable inflation erodes the value of investment returns over time, investors may shift their money to markets with lower inflation rates.

Most economists worldwide believe that low, stable and most important predictable inflation is good for attracting investors and building a strong economy.

Also, knowing that prices will be slightly higher in the future gives consumers an incentive to make purchases sooner which boosts economic activity.

As the EAC member states need to protect and attract more investments in the region, maintaining stable and predictable inflation rate is of paramount in the quest of building strong economic growth.