Zim told not to panic over deflation: The deflation characterising the economy has been described as a process of price self correction and should not warrant panic from socio-economic sectors. Since Zimbabwe entered into deflation, there has not been clarity on how it will impact the economy. The treasury says deflation is a persistent fall in the general price level in the economy and occurs when the rate of inflation is below zero percent. Price falls have to be in several sectors and not just one sector for deflation to be qualified. Retail sector expert, Mr Denford Mutashu said several goods were overpriced but cash constraints are just now forcing locals to appreciate the true value of the United States dollar. “One can argue that the economy is in price correction mode since the last quarter of 2013, so there is no need to press the panic button. We are still price above the region,” he said. The down side of the phenomenon is that consumers will postpone buying to the following month when prices have dropped, resulting in reduced aggregate demand, excess capacity and lower money supply, in turn forcing companies to cut prices, offer discounts and sales. The sale of agricultural produce, which has just been harvested, is expected to stimulate spending in the short term. “I am quite sure that in the last quarter of 2014, Zimbabwe will be somehow in the inflation zone and by December inflation will certainly hit below 1,5 percent,” Mutashu said. According to the Zimbabwe Statistics Agency (ZIMSTAT), the country registered deflation for the fourth month in a row since February this year. The year-on-year inflation rate for May as measured by the all-items consumer price index (CPI) stood at -0,19 percent after gaining 0,07 percentage points on the April rate of 0,26 percent. In February this year, the country recorded a deflation figure of -0,49 percent while in March the figure stood at -0,91 percent.
Posted on: Sat, 21 Jun 2014 15:54:23 +0000
Trending Topics
Recently Viewed Topics
© 2015