Zim’s inflation rate diminishing consumer and investor confidence

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Southern Times Writer

Harare - Zimbabwe’s annual inflation rate went up to 175.66 percent in June 2019, up from 97.85 percent in May.

According to Zimbabwe Statistical Agency’s (Zimstat) price increases have been witnessed mainly in basic commodities. The main drivers of inflation have been pointed to fuel and the black-market exchange rate that existed before the introduction of Statutory Instrument 142 which re-introduced the Zimbabwe dollar and barred the use of multi-currencies in the country. 

The increase in the inflation rate has negatively affected economic activity in the country and is currently eroding consumer and business confidence.

 

“I am worried that the prices will continue to go up and we will go back to the hyperinflation era of 2008. Also my salary is losing value by the day and my employer is not making any significant changes to the salary which is very frustrating,” stated Florence Gana in an interview with The Southern Times.

 

According to economic analyst, Tinashe Mapungwana, price inflation is a serious economic problem because it roots a number of significant costs to an economy, including reduced investor confidence.

“A rise in the price level means that money can buy fewer goods hence reducing consumer confidence and promoting hoarding as citizens may rather keep the value of their money in goods and property. Price inflation discourages savings and lending as well, hence reducing business source of working capital.  

“The balance of payments may also deteriorate because domestic inflation stimulates import spending, given that imports appear relatively cheaper, and dampens export sales, as exports appear more expensive abroad. If inflation continues to soar, companies may respond unfavourably, companies may anticipate that interest rates will have to rise to deal with inflation, and this undermines business confidence. Falling confidence is likely to force firms to postpone capital investment which is not ideal for Zimbabwe at the moment,” said Mapungwana.

However, for the rest of the Southern African region, inflation rates have been relatively on the low side due to maintained interest rates and low money supply.

According to Trading Economics, the annual inflation rate in Namibia fell to 3.9 percent in June 2019 from 4.1 percent in the previous month, hitting its lowest level since May last year. Prices slowed mostly for food and non-alcoholic beverages (3.9 percent vs 4.4 percent); transport (7.0 percent vs 7.6 percent); miscellaneous goods and services (1.8 percent vs 2.2 percent) and for recreation and culture (4.0 percent vs 4.5 percent).

On the other hand, costs advanced faster for housing and utilities (2.0 percent vs 1.9 percent); furniture and household equipment (1.1 percent vs 1.0 percent) and hotels, cafes and restaurants (5.4 percent vs 4.7 percent) while inflation was steady for alcoholic beverages and tobacco (at 5.5 percent).

The annual inflation rate in Angola also fell to 16.94 percent in June 2019 from 17.14 percent in the previous month. On the other hand, increases in inflation were seen in Botswana, Malawi and Zambia, rising to 2.8 percent, 9 percent and 8.6 percent respectively.

 

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