The ManicaPost
Kudzanai Gerede Business Correspondent
Latest figures from the national statistics agency (ZimStat) reflects that the economy is slowly trudging into the stable inflationary territory for the just ended month of June having endured several months of increase in inflation since beginning of the year.
Zimbabwe’s inflation sprung into positive territory for the first time since 2014 in January this year and since then it has taken a worryingly upward trajectory recording 0.48 percent in April before posting 0.75 percent rate in May.
This week ZimStat released figures showing year on year inflation rate for the month of June slowed down to 0.31 percent, posting a -0.24 percent rate shedding 0.27 percent points on the May 2017 rate of 0.03 percent.
The month on month Food and Non Alcoholic Beverages inflation rate stood at -0.45percent in June2017, shedding 0.52percentage points on the May 2017 rate of 0.07percent. The month on month non-food inflation rate stood at -0.14 percent, shedding 0.15 percentage points on the May 2017 rate of 0.01percent.
The latest figures come as a reprieve to both the constrained consuming public and business amid cash shortages stifling spending but analysts warn of oscillating patterns in the current volatile environment.
Buy Zimbabwe economic analyst Mr Kipson Gundani told Post Business in an interview that the slowdown in inflation is largely attributed to weak aggregate demand which started to manifest by end of first quarter this year.
“Suppressed aggregate demand is mainly behind the decrease on the inflation rate for the month of June,”
“If you look from January to April there was a steady increase in consumer spending, there was a spending spree and this meant brisk business and importers were making use of the parallel market at a premium to cope with the high demand. This was short lived and the cash shortages would soon intensify”
“So from May to June it kind of stabilized as there isn’t much spending hence prices are now sort of stable and if increasing, the rate is very much slower,” said Gundani.
Observers further point to the failure by the Central Bank to effectively curtail the flourishing of a three tier pricing system that is the root of inflation.
Discounts are being put on sales on hard currency while payments on mobile money transfer systems and Real Time Gross Settlements have a premium set on them.
The inflation outlook in the short to medium term remains ambiguous with a host of economic fundamentals in disarray such as an uncontrolled monetary system characterized by distorted exchange rates for bond notes currency among other issues.
“Going forward, our type of inflation is a cost-push kind of inflation heavily dependent on costs more than anything else. So we are likely to be in the same mode for the foreseeable future where we have an oscillating kind of inflationary situation depending on how the parallel market is dictating things unless Central Bank finds the right mechanisms to control the monetary system again,” added Gundani.
