Inflation to retreat: Economist

Source: Inflation to retreat: Economist | The Herald May 13, 2019

Gift Mugano

Machael Tome Business Reporter
Renowned economist and Africa Economic Development Studies (AEDS) executive director Dr Gift Mugano has predicted a decline in inflation as the year progresses towards mid-year owing to slackening demand due to customers’ limited buying power.

Basic commodities prices have lately been skyrocketing beyond the reach of many ordinary Zimbabweans but this might soon change as slowing demand has already begun to manifest in the economy with some reputable companies starting to revert back to lower prices.

His sentiments come on the back of Zimbabwe’s year-on-year inflation rate having spiked to 66, 80 percent for the month of March, 2019.

Dr Mugano indicated that the country was already witnessing waning demand of commodities as customers can no longer afford to buy excessively priced goods since incomes have remained stagnant.

“Inflation is going to go down because of decline on the demand side, products are being priced using inflated exchange rate (and) by that business is placing itself out of the market because customers are out of money.

“We are already seeing indications of slow demand. By mid-year there should be negative month on month inflation because people will not be buying, businesses can’t continue to raise prices because the salaries have not gone up,” said Dr Mugano.

Dr Mugano hinted on possible self-price correction in the value chain down from the retail sector given the inability to absorb products by the customer base. He implored the private sector to device other cost containment measures than relying on premium pricing.

“We are expecting that there will be value chain price self-correction from retail back to value chain, they are not going to hike prices amongst themselves because at the end of the chain there is no uptake by consumers.

“ . . . because customers don’t have the money and prices have gone beyond their reach, that is going to correct the price, private sector need to have cost containment measures.”

Delta Corporation, has since reduced prices of its soft drinks in a bid to stimulate demand, which had markedly declined in the last few months as consumers could not afford the high prices.

A 300ml returnable soft drink’s new recommended retail price is RTGS$1,25, down from almost RTGS$1,80. The price of a 330ml can of Coke Zero is down to RTGS$1,60; 330ml cans are pegged at RTGS$1,80; 500ml PET (RTGS$2,15); returnable 1 litre (RTGS$3,60); while the 2 litre PET is now RTGS$6,40).

“The reality is that the prices that were prevailing in the market were not generating any demand. So we are trying to recommend these retail prices to guide the market. So the issue of availability is one thing; we have stock in the warehouse for the past three weeks and the market was not taking it up because the prices were high, at the prevailing RTGS prices,” said company secretary Alex Makamure.