HARARE – Zimbabwe is likely to experience a decline of inflation as the year progresses towards mid-year owing to slackening demand on the market due to customers’ limited buying power, economist Dr Gift Mugano has said.
Basic commodities prices have lately been skyrocketing, going miles beyond the reach of many ordinary citizens.
Slow demand has already begun to manifest in the economy as some reputable companies have started reverting back to lower prices.
His sentiments come on the back of Zimbabwe’s year-on-year inflation rate spike to 66, 80 percent for the month of March, 2019.
Africa Economic Development Studies (AEDS) executive director Dr Gift Mugano indicated that the country was already witnessing waning demand of commodities as customers can no longer afford to buy excessively priced goods since incomes have remained stagnant.
“Inflation is going to go down because of decline on the demand side, products are being priced using inflated exchange rate, by that business is placing itself out of market because customers are out of money.
“We are already seeing indications of slow demand. By mid-year there should be negative month on month inflation because people will not be buying, businesses can’t continue to raise prices because the salaries have not gone up,” said Dr Mugano.
Dr Mugano hinted on possible self-price correction in the value chain down from the retail sector given the inability to absorb products by the customer base.
He implored the private sector to device other cost containment measures than relying on premium pricing.
“We are expecting that there will be value chain price self-correction from retail back to value chain, they are not going to hike prices amongst themselves because at the end of the chain there is no uptake by consumers.
“… because customers don’t have the money and prices have gone beyond their reach, that is going to correct the price, private sector need to have cost containment measures.”
On the broader economic scale, Dr Mugano said it remains an uphill task for the government to attain the 3, 1 economic growth rate, given the drought and natural disasters that befell the country in the 2018/19 rainfall season.
Furthermore, he pointed out low commodity pricing on the international market as another hurdle to the realisation of the intended growth rate.
“Economic growth rate might not reach 3, 1 percent because of harsh climatic conditions through drought, Cyclone Idai which will undoubtedly increase expenditure on government.
“Prices for our major exports which include platinum and gold are currently depressed with platinum fetching $800 per ounce (from $2 200 in 2008),” said Dr Mugano.
He implored the government to intensify cereal production if the country was to cut the heavy import bill on cereals.