Zimbabwe: Zim Economy in Deflation Challenges

Photo: Antony Kaminju/IRIN
A woman sells vegetables at a food market in Harare.

ZIMBABWE'S year-on-year inflation rate shed 0.42 percentage points on March 2013 rate to close the month of March 2014 at -0.91%, latest Zimbabwe National Statics Agency (Zimstat) figures show.

This means prices as measured by all items consumer price index (CPI) decreased by an average of 0.91% points between March 2013 and March 2014, as the economy suffers from a liquidity crunch that has pushed prices downwards.

A number of companies have either laid off workers or shut down due to macro-economic challenges that include lack of capital thereby reducing spending power.

Zimstat said year-on-year food and non-alcoholic beverages inflation prone to transitory shocks stood at -3.71% whilst the non-food inflation rate was 0.51%.

The month-on-month inflation rate in March 2014 was -0.22%, shedding 0.27 percentage points on the February 2014 rate of 0.05%, meaning prices as measured by all items CPI decreased at an average rate of 0.22% from February 2014 to March 2014.

Zimstat said month-on-month food and non-alcoholic beverages inflation stood at -0.14% in March 2014, shedding 0,32 percentage points on the February 2014 rate of 0.18%.

"The month-on-month non-food inflation stood at -0.26%, shedding 0,25 percentage points on the February 2014 rate of 0.01%

The CPI for the month of March stood at 100.30 compared to 100.53 in February 2014 and 101.23 in March 2013.

A March Treasury report shows year-on-year inflation declined from the 0,41% recorded in January 2014, to -0,49% in February. Month-on-month inflation also slowed down to 0,05%, down from the 0,14% recorded in January.

Major drivers of the decline in prices included food and non-alcoholic beverages, education and transport.

Going forward, inflation is expected to remain subdued due to depressed aggregate demand, stable international oil and food prices, as well as strengthening of the US dollar against currencies of our major trading partners.

"In this regard, deflationary pressures experienced during February will continue to affect the economy in 2014, due to an extending negative output gap," said Treasury.

Money supply growth, in January 2014 declined by 1,1%, from the US$3,932 billion recorded in December 2013 to US$3,888 billion in January 2014.

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