Old Mutual issues inflation warning
CLOUDINE MATOLA
The Old Mutual Investment Group has issued a warning about the potential inflationary impact of Professor Mthuli Ncube’s 2024 national budget on real investment returns.
In its latest economic report, Old Mutual said taxes will be borne by the final consumers, leading to cost-push inflation pressures.
“The proposed tax reforms will likely be passed on to final consumers, resulting in cost-push inflation pressures in the short term outlook,” Old Mutual said.
After a heated debate in Parliament, Professor Ncube withdrew his initial proposal for new taxes, which included a 1% wealth tax on residential properties valued at US$100,000 and above. Instead, he increased the tax threshold to US$250000, lowered the age at which the exemption begins to 65, exempted the taxpayer’s primary residence, and set a cap of US$50,000 per year on the total amount of taxes that any one person could be required to pay.
Nonetheless, Professor Ncube upheld the new soft drink sugar levy of US$0.02 per gram of sugar in beverages and reviewed fuel levies, raising them by US$0.03 and US$0.05 per litre of gasoline and diesel, respectively.
The original plan to raise passport fees from US$120 to US$200 was retracted, and a standard passport is now only US$150. He also announced a 50% increase in road fees, backing away from the original proposed 150% hike.
According to Old Mutual, the budget is expected to raise national inflationary pressures.
“The recent budget proposals seem inflationary in the immediate short-term outlook, yet the medium to long-term impact of disciplined execution of the proposals (maintaining a narrow deficit) is likely to contain inflationary pressures,” Old Mutual said.
Furthermore, according to Old Mutual, actual investment returns could be impacted in the upcoming year.
“A generally inflationary outlook to year-end threatens real investment returns while presenting support for local non-monetary assets, particularly on safe haven demand,” Old Mutual said.
Food and energy prices drove Zimbabwe’s annual inflation rate, which increased to 21.62% in November from 17.82% the previous month. The pressure on energy inflation was primarily caused by higher electricity rates.
