Despite a decline in inflation over the past four months, people’s purchasing power has not been restored. Although some companies have reduced their prices to boost sales, consumption is still expected to fall by 8% this year. Real wages in the formal private sector have declined by an average of 6.1%, and according to Abeceb, disposable income and consumption may not fully recover until 2025.
One of the main reasons for the decline in purchasing power is the significant increase in prices of key goods and services such as electricity, gas, food, and transportation. These price hikes have exceeded the rate of inflation, leaving people with less money to spend on other products and services. For example, while inflation was at 290% in March, prices of items like food, medication, and transportation increased by over 300%, significantly impacting people’s budgets. As a result, many are cutting back on expenses, leading to a decline in sales for supermarkets, restaurants, and other businesses.
To cope with this challenging economic environment, consumers are turning to local stores, buying second or third brand products and taking advantage of discounts and promotions. Companies are also optimizing costs by negotiating with suppliers and adjusting their sales strategies to cater to more budget-conscious consumers.
The impact of reduced purchasing power is also evident in the decline in sales of appliances and other big-ticket items. Retail sales in general have been negatively affected; car registrations are also experiencing significant drops due to reduced demand from buyers who cannot afford them.
In conclusion, it will likely be a long road to economic recovery due to these challenges faced by both consumers and businesses alike. Adjustments will need to be made before disposable income and consumption can return fully to pre-crisis levels.