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Zim Economy Posts Deflation Despite High Growth Projections

The Zimbabwe National Statistical Agency (ZIMSTAT) says year-on-year inflation for February was -0.49 percent -- almost a whole percentage point lower than January's 0.41 percent.

Economists say this indicates continued dampened economic activity in the country.

The figures appear to tally with the Economic Intelligence Unit which predicted that Zimbabwe’s economy will grow by only about 2.6 percent in 2014 instead of the 6.1 percent projected by Finance Minister Patrick Chinamasa when he presented the country’s national budget last December.

However, independent economist, Masimba Kuchera told Studio 7 that there are some economic indicators, especially from the agricultural sector, that may change the fortunes of the country’s bleak economic outlook because of the good rains.

“It is difficult to predict what will happen before the end of the year because there are some indicators that the situation may change,” he said.

Sustained deflation can be dangerous for an economy as a widespread decline in prices may lead to consumers delaying purchases.

But director, Godfrey Kanyenze of the Labor and Economic Development Institute told VOA Studio 7 the current deflation will cause a destructive spiral as companies will be forced to cut prices and wages and lay off workers, leaving consumers with less money to spend.

"This is a reflection that there is dampened economic activity. There is hardly any major economic activity taking place," he said.
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