Economists cautious as inflation falls

ECONOMISTS have given mixed views about Zimbabwe's decelerating annual inflation with some saying the rate could spike once spending increases.

However, others told NewsDay Business yesterday that the slowdown represented progress in monetary authorities' strategy.

They spoke as authorities said last week that annual inflation declined to 50% in August, from 56% in July.

Year-on-year inflation has been falling since the beginning of the year, with the Reserve Bank of Zimbabwe saying the rate will likely end the year at about 30% .

"The drop in annual inflation shows that prices are no longer going up as much as they did during the same time last year," said economist, Victor Bhoroma.

"However, on the ground prices are marginally going up as depicted in constant increases in the Total Consumption Poverty Line (TCPL)."

TCPL increased to $37 165 in August this year, from $35 590 in July.

Another economist Clemence Machadu said the downward trends mirrored low domestic demand due to COVID-19-induced lockdowns.

"We have witnessed many job losses since last year as well people working fewer hours, both pointing to incidents of increased unemployment and underemployment.

"This affected disposable incomes and further reduced spending power, which also puts downward pressure on inflation.

"Right now, the consumer basket is still higher than average incomes and the generality of the populace do not afford all basic necessities.

"So our eyes should not be glued on taming inflation alone, but on trying to get the balance right on other economic fundamentals.

"Otherwise for now, I wouldn't pop my champagne bottle at the moment," Machadu said.