THE ZIMBABWE economy is close to deflation due to the stagnancy and decline in prices as consumer spending continues to weaken, it has emerged.
Local economist Tony Hawkins said the country is witnessing what the Japanese went through in the past having no price increases at all or witnessing price decline.
Deflation is a decrease in the general price level of goods and services.
“This shows that the economy is weakening. Firms are trying to move goods off the shelf as the cost of keeping the inventory will cost them either from their suppliers or from banks where they have borrowed, ”he said.
Confederation of Zimbabwe Industries president Charles Msipa said the reduction in prices was a sign of correction as most of the commodities in this economy were highly priced since the country adopted the multi-currency system in 2009.
“There is a painful correction with regards to prices. When we dollarised we did not peg our prices properly. We did not value and price goods correctly despite the fact that we were using the United States dollar,” Msipa said.
A snap survey by our sister paper NewsDay, showed that a number of companies including Schweppes, Nestlé Zimbabwe and Edgars had reduced the prices of some of their products.
On the other hand furniture stores such as TV Sales and Hire were running promotions which allow customers to buy furniture at 0% deposit, but payable over six months on the same amount and applying to products that cost $300.
MMC Capital researcher Kudzanai Samudzi said the decline in the prices of commodities was a sign that producers were trying to entice customers to purchase their products despite the liquidity challenges in the economy.
“The waning demand in the economy is because there is no liquidity in the economy. Producers are chasing few amounts of money in consumers’ pocket to get something. For instance if a company’s mark up for a certain product was 40% or so, it would not be attractive instead they will reduce it to entice customers,” he said.