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Economic growth forecast revised

ZIMBABWE has slipped into a mild recession due to a lack of growth in the economy as the liquidity situation remains dire. Figures released by the Zimbabwe National Statistics Agency (Zimstats) showed that annual inflation for August was down to 3,63% from 3,9% in July as demand for goods and services remained constrained. The low inflation makes economic recovery slower. Already, Finance minister Tendai Biti revised downwards this year’s economic growth forecast to 5,6% from 9,4% last year.

Report by Our Staff Writer

Against the backdrop of a waning growth momentum and continued low confidence because of the various unpopular policies, real GDP is expected to stagnate after the downward revision in the growth forecast. Analysts say that these are signs of a mild recession.

Market analyst Jerome Negonde said the economy was now characterised by stagnant salaries and wages, with minimal adjustments being made as this whould leave less money for working capital.
Negonde said stagnant salaries discouraged spending and the point extended to the larger purchases like cars and homes that generally depend on loans as it was becoming increasingly difficult to access cheaper funding.

In countries which use their own currencies, when inflation is relatively low the printing press is activated to add to the money supply (quantitative easing) as a way of stimulating demand for goods and services.

Economic analyst Eric Bloch said the downward trend in inflation was attributed to fluctuations in real demand for goods and services largely because of low disposable incomes in the majority of the public.

This he attributed to the persistent liquidity crunch in the economy which was resulting in limited cashflows.

“The slowdown in inflation is due to the fact that the demand side of the economy has been depressed since the beginning of the year and this is reflected through reduced appetite for goods and services,” said Bloch.

He however said the country was facing significant inflationary pressures emanating from a poor harvest in the last season, demand for rental accommodation and increasing utility prices.

Food and non-alcoholic beverages in the period remained the major inflation drivers recorded and were at 4,2% and 3,8%, respectively.

The month-on-month food and non-alcoholic beverages inflation stood at -0,11% in August 2012, shedding 0,09% points from the -0,02% recorded in July.

The month-on-month non-food inflation stood at -0,21%, shedding 0,54% points on the July rate of 0,33%.

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