Some considerations of the impact of inflation on the economic growth of organizations

Written by:Diomer Antonio Galán Rincón.

Bachelor's Degree.Public Accounting / MSc.Science of Higher Education.

Inflation is one of the most serious macroeconomic difficulties that can affect a country's economy, affecting the entire productive apparatus, the service system, as well as the daily life of its citizens. This causes the purchasing power of the salary to decrease very drastically, therefore, individuals change even their purchasing preferences, due to the need to establish urgent priorities.

About this Arias (2013), says "inflation consists of a generalized increase in prices due to the increase of money in circulation". In context the rise in prices is a consequence of inflation and not inflation itself. In this sense, inflation is a term of an economic nature, but it affects different aspects of communities, both social and political".

We can say that the concrete and immediate causes of inflation are diverse among which we can mention:

- When the money supply is greater than the supply of goods and services.

- When the production value of goods increases due to the increase in the price of raw materials, as well as transportation and other transfer factors.

- Updating of production costs due to the variation in the value of the purchase of raw materials in foreign currency.

- Uncertainty and nervousness on the part of the consumer to acquire the few products in the market, causing the seller to take advantage of this situation and increase the existing merchandise.

In the Venezuelan case, this inflation has reached hyperinflation levels for several years, with a constant and rapid increase in the prices of each product; therefore, companies also experience many problems and difficulties, because their sales in nominal value increase, but the real value of their income decreases, redirecting the behavior of consumers towards basic necessities, presenting more problems for those companies that are not in the food and basic services sector, since the consumer allocates his investments to the prioritized needs.

On the other hand, a process of uncontrolled inflation produces uncertainty in the market, with which many business projects and investments stop being developed while waiting for the bad times to be overcome, bringing as a consequence a diminished economic growth, in other occasions null, which leads organizations to close their doors.

I hope you like my article and I would appreciate all your comments.

1.- Arias, G. (2013) Inflation and budget management in mixed companies of the oil sector in the municipality of San Francisco. University of Zulia. Faculty of Economic and Social Sciences. Maracaibo, Zulia State, Venezuela.