Zimbabwe marks full year of negative inflation

deflation

ZIMBABWE this week marks a full year with its economy in negative inflation as latest statistics show the country’s annual inflation closed the month of February 2016 at -2,22 percent.

According to the Zimbabwe National Statistics Agency (Zimstat), the annual inflation was down 0,03 percent from -2,19 percent in January, pushed by a decline in health prices as well as electricity, gas and other fuels.

This marks 12 full months with inflation in negative territory after having slid into deflation in February 2015.

Deflation occurs when the economy’s rate of inflation goes below zero. On a monthly basis, Zimstat also revealed the inflation rate was -0.10 percent after shedding 0.05 percentage points on January rate of 0.05 percent. This means that prices as measured by the all items Consumer Price Index (CPI) decreased at an average rate of -0.10 percent from January 2016 to last month. CPI is a measure of average change over time in the prices paid by consumers for a market basket of goods and services.

Developments in the economy have largely restricted consumer spending due to limited purchasing power while authorities have insisted that the negative inflation was correctional as it forced companies to re-adjust prices for goods and services which were set at a premium in 2009.

Zimbabwe adopted use of multi-currencies five years ago in 2009. According to Zimstat, month-on-month inflation in February stood at -10 percent after shedding 0.05 percentage points from 0,05 percent the previous month.

The government has forecast that inflation will be hovering around-1,6 percent by end of 2016. The rate at which the price of goods and services increases in Zimbabwe has largely remained steady since adoption of multi-currencies.

Employers’ Confederation of Zimbabwe president Joe Kahwema said prices were continuing to go down owing to a fuel price reduction among other fundamentals.

“Prices are going down because people (businesses) are trying to be competitive as you might be aware that most of the country’s products are imported from South Africa. Prices on the local market are going down owing to the depreciation of the rand against the strengthening of the United States dollar.

“Also the limited disposable income currently being experienced by consumers is one of the factors that has caused prices to go down,” he said.

Economic commentator Trust Chikohora said the deflationary trend was likely to continue going forward due to depressed demand as there was not much economic activity.

“The -2,22 percent inflation rate is simply a confirmation that the economy is still in a deflationary mode and the trend is likely to persist due to depressed demand as there is also limited cash in the economy because there isn’t much economic activity.

“To an ordinary person, the -2,22 rate means that prices have gone down by that margin between February last year and last month.

“It also confirms that the market has become more of a buyers’ market where people selling have to reduce their prices for consumers to buy,” said Chikohora.

Meanwhile, the Consumer Council of Zimbabwe (CCZ) has said the cost of living for low income urban earners’ monthly basket for a family of six decreased from $557.58 in January to $554.21 last month.

“As CCZ, we assume that the above price decreases are necessitated by the reduction of fuel costs as more commodities are imported from outside the country. However, the increase in mealie-meal prices is due to importation costs and shortage of maize in the country,” it said. – New Ziana/Business Reporter.

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