Inflation continues on downtrend

HARARE - Zimbabwe's year-on-year inflation declined to 0,54 percent in November from 0,59 percent recorded previous month despite the liquidity crisis in the country.

Inflation in this year’s forecast is expected to close at around 3,9 percent and predicted to decline further as the country’s economy slows down and local prices track the declining value of South African Rand.

The Zimbabwe National Statistics Office (Zimstat) yesterday said because of the tight liquidity situation, there is an across-the-board weakness in consumer spending or low aggregate demand.

South Africa is Zimbabwe’s main trading partner accounting for 40 percent of total exports and 60 percent of total imports.

Economists said inflation will most likely remain under control this year with the underlying core rates projected to trend sideways or down throughout most of next year unless there are fundamental changes in the economy.

Low or moderate inflation is generally attributed to fluctuations in real demand for goods and services.

Market analysts contend that in normal situations, a decline in the rate of inflation would be welcome.

But with the economy currently facing significant inflationary pressures emanating from — among other things —  the poor harvest in the past season, demand for rental accommodation and increasing utility prices, observers believe the downturn in annual inflation lately is largely due to poor economic performance.

Since the controversial re-election of President Robert Mugabe and his Zanu PF party in August this year, the economy continues to face challenges such as erratic power supplies, liquidity constraints, depressed industrial capacity, among other issues.

Zimbabwe’s economy is expected to grow by 3,4 percent this year, down from earlier projections of five percent, while the country’s current account deficit worsened by half a billion in the 10 months to October due to falling exports.

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