News / National
Bleak outlook for Zimbabwe's consumers
07 Jul 2024 at 05:58hrs | Views
Inter Horizon (IH) Securities, a prominent financial services firm, has released a sobering report on Zimbabwe's consumer spending patterns for 2024. The analysis paints a bleak picture, attributing the gloomy outlook to persistently low wages and limited discretionary income among consumers.
According to IH Securities' 2024 consumer sector report, Zimbabwe's working poverty rate surged to 35.35% by the end of last year, up from 20.17% in 2013. This metric, defined by the International Labour Organisation, signifies the percentage of the working population living on less than US$2.15 per day in terms of purchasing power parity.
The report highlights that a significant portion of the workforce, approximately 34%, earns below US$90 per month, with those at the 75th percentile earning between US$272 and US$362 monthly. Civil servant salaries have historically set the baseline for wage growth, with recent increments including a COVID-19 allowance rising from US$75 in 2020 to a current US$300, now pensionable since the beginning of this year.
Looking ahead, IH Securities projects a potentially depressed year for consumer spending, despite some resilience expected from the mining sector, particularly in gold operations benefiting from elevated prices. Remittances, totaling around US$2 billion annually, also contribute to bottom-of-the-pyramid liquidity.
The report notes that 83% of transactions for key food purchases like maize, cooking oil, and beef were conducted in US dollars in the first quarter, underscoring the dollar's role as a store of value amid persistently high USD inflation, which stood at 3.48% annually as of May. This inflation has slightly eroded consumer buying power over the past year.
Within the Consumer Price Index basket, IH Securities identifies significant increases in education costs (up 15.4%) and transport (up 13.5%), adding to consumer financial pressures. Economic growth for 2024 is forecasted at a modest 3.5%, constrained by weak performances in primary sectors, particularly mining where mineral revenues are expected to decline by 10% due to depressed prices.
Fewsnet, in its June 2024 to January 2025 food security outlook, underscores the constraints on household purchasing power, with many poor households relying on informal markets to purchase small quantities of food, often on credit or through borrowing.
Overall, IH Securities' report paints a challenging economic landscape for Zimbabwe in 2024, marked by constrained consumer spending, elevated inflation, and economic growth hurdles exacerbated by sector-specific challenges.
According to IH Securities' 2024 consumer sector report, Zimbabwe's working poverty rate surged to 35.35% by the end of last year, up from 20.17% in 2013. This metric, defined by the International Labour Organisation, signifies the percentage of the working population living on less than US$2.15 per day in terms of purchasing power parity.
The report highlights that a significant portion of the workforce, approximately 34%, earns below US$90 per month, with those at the 75th percentile earning between US$272 and US$362 monthly. Civil servant salaries have historically set the baseline for wage growth, with recent increments including a COVID-19 allowance rising from US$75 in 2020 to a current US$300, now pensionable since the beginning of this year.
Looking ahead, IH Securities projects a potentially depressed year for consumer spending, despite some resilience expected from the mining sector, particularly in gold operations benefiting from elevated prices. Remittances, totaling around US$2 billion annually, also contribute to bottom-of-the-pyramid liquidity.
The report notes that 83% of transactions for key food purchases like maize, cooking oil, and beef were conducted in US dollars in the first quarter, underscoring the dollar's role as a store of value amid persistently high USD inflation, which stood at 3.48% annually as of May. This inflation has slightly eroded consumer buying power over the past year.
Within the Consumer Price Index basket, IH Securities identifies significant increases in education costs (up 15.4%) and transport (up 13.5%), adding to consumer financial pressures. Economic growth for 2024 is forecasted at a modest 3.5%, constrained by weak performances in primary sectors, particularly mining where mineral revenues are expected to decline by 10% due to depressed prices.
Fewsnet, in its June 2024 to January 2025 food security outlook, underscores the constraints on household purchasing power, with many poor households relying on informal markets to purchase small quantities of food, often on credit or through borrowing.
Overall, IH Securities' report paints a challenging economic landscape for Zimbabwe in 2024, marked by constrained consumer spending, elevated inflation, and economic growth hurdles exacerbated by sector-specific challenges.
Source - The Standard
