HARARE – Economists and business executives in Zimbabwe have expressed concerns about weakening demand for commodities and services as consumers struggle with the rising cost of living.
The depreciation of the Zimbabwean dollar has significantly eroded people’s buying power, particularly for those earning local currency. While a majority of transactions are now conducted in US dollars, there is a lack of sufficient liquidity in that currency to stimulate demand.
Disposable incomes have been eroded by inflation, and many workers, both in the formal and informal sectors, are not earning enough to boost demand. The Confederation of Zimbabwe Industries (CZI) has reported a decline in aggregate demand, with order quantities decreasing as well.
Some analysts suggest that the decline in order quantities may be due to changes in trading terms, with companies requiring upfront payments in Zimbabwean dollars. The Zimbabwean economy is experiencing currency volatility, making it challenging for businesses to supply goods.
The erosion of Zimbabwean dollar incomes has led to concerns about weakening aggregate demand, but others argue that the economy is already heavily dollarized, and demand is sustained by artificial factors and fears of product shortages.
The Reserve Bank of Zimbabwe governor has warned against full dollarization, as it could lead to a further decline in demand and job losses.
