Home » Business » April Annual Inflation Down to – 2,65 Percent

ZIMBABWE’S annual inflation for April shed 1,45 percentage points to -2,65 percent from the March rate of -1,20 percent according to figures released by the Zimbabwe National Statistics Agency (Zimstats) on Friday.

This means that prices decreased by an average -2,65 percent between April 2014 and April 2015 as price correction creeps into the system.

The month on month inflation rate in April 2015 was -0,89 percent shedding 0,86 percentage points on the March 2015 rate of -0,03 percent.

Zimbabwe’s inflation once regarded as the highest in the world during the country’s economic meltdown that came to an end in 2009, has continued to trend downwards.

The sustained drop indicates weak consumer demand against a backdrop of tight liquidity conditions coupled with benefits accrued from the fall of the South African Rand against the United States dollar. Prices remain subdued on the back of weakness in the labour market due to relatively stagnant salaries as well as the lack of credit will continue to act as a headwind to discretionary consumer spending.

Low and declining inflation, whilst indicative of price stability, could be also an indicator of subdued economic activity. The liquidity situation in the country remains constrained, as a result there is weak aggregate demand for goods and services.

According to Zimstats, the main prices to go down during the period include airtime, bread and beer. The decline was largely on the back of decreases in communication, furniture and equipment, transport, recreation and culture, restaurants and hotels, among others.

The year on year Food and Non Alcoholic beverages stood at -2,93 percent while the Non-food inflation rate was-2,51 percent.

The month on month Food and Non Alcoholic Beverages inflation rate stood at-0,63 percent in April 2015, weakening -0,59 percentage points on the March 2015 rate of -0,03 percent.

Non-food inflation rate stood at-1,01 percent month on month, down -0,99 percentage points on the March 2015 rate of -0,03 percent.

Despite Zimbabwe’s inflation remaining negative since October 2014, the RBZ is of the view that the country is experiencing disinflation and not deflation. The RBZ said price reduction in the national economy was a necessary process towards correcting the high prices obtaining in the country. But Techfin Research said the obtaining situation amounted to deflation. “Zimbabwe is experiencing slow economic growth, weakening aggregate demand, high unemployment, tight liquidity, increased loan defaults, reduced lending by banks to productive sectors, which are all signs of deflation,” said Techfin.

Techfin said all these symptoms were actually a warning that something is wrong in the economy and needs to be addressed, policies should be skewed towards stimulating aggregate demand and improving liquidity

Source : Financial Gazette