Inflation: Cost cutting at household level expected
MBABANE – SARFED Regional Coordinator Dr George Choongwa says cost cutting implications mainly at household level are expected should inflation levels continue to skyrocket in the next economic periods.
In a statement issued on 7uesday, the Southern $frican 5esearch )oundation for (conomic Development S$5)(D regional coordinator said some of the implications include the reduced purchasing power.
Dr &hoongwa said consumer purchasing power happens when too much money was only aEle to Euy too few foods and services.
He said in other words, the current increase in consumer prices due to increased inflation was leading to what could Ee termed as large real income losses, among consumers and thus to significantly reduced purchasing power.
Dr &hoongwa said consumers have noticed the steadily increase in the ta[ variations especially value added ta[ 9$7 on several commodities, especially energy, due to constrained supply processes from South $frica, Eeing its maMor e[porter.
He said households or individual consumers would have to cut down on their normal disposaEle income levels of spending, if they were to adMust and fit in the current situation.
Reduced
7he coordinator said another area that was likely to face much challenge was the Eanking sector. He said with the increased levels of inflation and reduced financial liTuidity, household income was e[pected to decline consideraEly, due to reduced levels of income savings and consumption rate.
He said the danger would Ee vivid if individual Eanks either delay or completely fail to develop new models to accommodate the shrinking monetary Easis from their respective clients.
“In other words, the more inflationary levels are reached and the more reduction on the purchasing power, the more e[pensive Eanking would Eecome, causing most of people to opt for informal systems of transaction,´ he added.
Dr &hoongwa said a further note, when there was reduced house hold savings and consumption, people should e[pect negative trends of social disorder and income induced stress.
He said recent studies indicated that the maMority of the working population was e[pected to remain unproductive due to income induced stress.
He said it should Ee known that reduction in consumption and savings would eventually Ering aEout reduced levels of supply chain system. “7his would then Ering aEout reduction in sales, ta[, and employment Ease. 7he danger would then Ee estaElished if MoEs were lost as this would Ering aEout an e[pansion in household poverty levels,´ he said.
Stimulates
7he coordinator said, therefore, it would Ee an act of prudence if government stimulates the local supply chain system with emphasis on value addition so as to improve domestic economic Eehaviour.
Dr &hoongwa recommended that promotion of financial literacy for employees would serve a great deal in helping employees remain prudent
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He said through financial literacy employees would eTually Ee aEle to make sound financial decisions and practice prudence in their respective Eudget e[ecution processes and there should Ee stimulation of local supply chain with improvement in value addition as to Eoost and strengthen domestic economic performance.
He said local cost-effective supply chain systems have the potential to create sustainaEle MoEs, especially in the agri-Eusiness sector as well rural development.
Dr &hooongwa also mentioned that inflationary pressures in (swatini were felt towards the end of and were e[pected to remain with steady increase to due high level of gloEal uncertainty, largely driven Ey increased prices for energy, food, and transport, reflecting the impact of gloEal economic disruption, especially the geopolitical tension 5ussia and 8kraine as well as &hina and the 8nited States of $merica.
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