Zim inflation static at -2,47pc

HARARE - Zimbabwe's consumer prices fell by 2,47 percent in December 2015, slightly

unchanged from the same rate in November which was at -2,46 percent, statistical agency Zimstats said on Friday.

On a month-on-month basis, prices declined by 0,11 percent shedding 0,27 percentage points on November 2015 rate of 0,16 percent.

The latest figures come after the general price level in the economy remained low last year, with year-on-year inflation opening the year at –1,3 percent and reaching –3,3 percent by October 2015.

Finance minister Patrick Chinamasa recently said inflation deceleration, however, also reflects price correction, weak aggregate demand, tight liquidity and depreciation of the rand against the United States dollar.

“In the outlook, inflation is likely to stay around zero, mainly as a result of appreciation of the US dollar, which dampens import prices,” he said.

However, economic analysts said the country’s inability to control deflation was damaging to the economy in the medium-to-long-term.

“Irrespective of the many positive steps seen over the past two years in Zimbabwe’s monetary sphere, the inability to curb deflation — in the absence of a sovereign currency and benchmark interest rates — is to the detriment of Zimbabwe’s medium-to-long-term economic growth potential by eating into its productive sector,” Oxford University-owned research unit, NKC African Economics (NKC) said in its recent commentary on Zimbabwe’s economic performance.

“As commented before, declining consumer prices — associated with the strength of the US dollar against the South African rand as well as slack domestic demand — is having an adverse impact on local productive capacity,” said the research unit, adding Zimbabwean companies producing food and consumer goods are having a tough time competing with cheaper imports from South Africa despite protectionist measures helping them.

Zimbabwe’s economy has been in crisis for 15 years after the land reform programme led to a collapse of the agriculture sector, while hyper-inflation wreaked havoc, unemployment boomed and millions of Zimbabweans fled abroad.

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