Harare, Zimbabwe (PANA) - Local economists say private consumption as a share of the gross domestic product (GDP) has rapidly fallen since 2017, the year President Emmerson Mnangagwa and his administration took power.
Speaking at a recent local event, economist Joseph Mverecha said last year’s austerity measures of increased taxes had serious consequences on private consumption.
“Look at this (points to slides), these are statistics from Zimstats, the red lines are my own stats. Private consumption as a share of GDP, 103% in 2009, 87% in 2012, 85% in 2015 but beyond 2019, in fact, starting from 2017, this is rapidly coming down,” he said.
“Unless you have a recovery in private consumption as a share of GDP there is limited chance for positive growth. That is why even for 2020, my focus as you will see, speaks to some negative growth of some sort because consumption as a huge share of GDP is declining. I estimate it was 55% (for 2020), 59% in 2019 from 69% (in 2018).”
He said that government needed to realign wages to inflation to correct the decline.
Private consumption is defined “as the value of the consumption goods and services acquired and consumed by households”.
Private consumption covers all purchases made by consumers including food, housing (rentals), energy, clothing, health, leisure, education, communication, and transport.
in Zimbabwe, spending in these areas have drastically fallen as a result of hyperinflation, driven by a depreciating local currency which consequently continues to erode consumer wages.
In CZI’s Manufacturing Sector Survey for 2019, it found that 70 percent of monthly incomes was being spent on just food alone, a significant increase over prior years.
“We have an issue of deficient aggregate demand. You cannot expect this economy to grow on the back of what? When aggregate demand is very low… For us to maintain our living standards, the economy should grow at the rate at which the population is growing,” University of Zimbabwe senior lecturer in the economics department, Phineas Kadenge said.
“We have not been doing well because the living standards having been going down and in my view I think it has something to do with policies…It is not that we don’t know what needs to be done, it’s that we don’t do what needs to be done. We talk about it, but not do it.”
National Consumer Rights Association co-ordinator Effie Ncube said consumers were restricting themselves to the most basic goods and services.
“What consumers used to spend has been completely eroded by the runaway hyperinflation, and incomes have not been able to keep pace with price volatility caused by currency instability,” he said.
“The best way to increase consumer spending is to create jobs that pay high and inflation-adjusted salaries, contain the cost of living across the board, eliminate shortages of goods and services, stabilise or eliminate the Zimbabwe dollar, improve consumer confidence and cut taxes on lower and middle incomes.”
-0- PANA TZ/VAO 16Feb2020