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Suffering Zim consumers fuel deflation scourge

Harare – Prices for goods and services in Zimbabwe have been on a downward spiral as suppliers, both local and foreign, reduce prices in an effort to stimulate retail demand.

The falling level of discretionary income has forced more consumers to downgrade their purchases to less expensive alternatives.

Higher levels of unemployment and the growing informal sector have also forced consumers to continue looking for low-priced basic items.

The continued decline in prices and sales is likely to result in Zimbabwe’s Treasury earning less from revenue lines such as VAT, corporate tax and PAYE.

In this climate, the Zimbabwean government says the deflation scourge currently being experienced in the country is likely to persist.

In a first-quarter Treasury report dated June 17, the ministry said deflation will persist due to depressed aggregate demand, stable international oil and food prices as well as appreciation of the country’s real effective exchange rate.

The annual inflation for May was at -0.19%, gaining 0.07 percentage points on the April rate of -0.26% as the drop in prices slowed down when compared to last year, particularly for non-tradeable goods.

The month-on-month inflation rate in May turned negative at -0.13% after shedding 0.71 percentage points on the April rate of 0.58%.

Source – Fin24