As was largely expected, the World Bank has cut its economic growth forecast for Zimbabwe to 2,7 percent for 2020 due to a sharp rise in inflation as well as drought.
The growth rate is lower than Government’s 3 percent growth and also 0,8 percent lower than the World Bank’s earlier projection of GDP growth rate of 3,5 percent made in June last year.
The World Bank also sees Zimbabwe GDP growth averaging 2,65 percent in 2021-22. In its Global Economic Prospects report for 2020 released this week, the Washington-based lender sees a weak economic outlook for Zimbabwe as a result of severe drought and sharp inflation. Zimbabwe experienced drought in the 2018/19 agricultural season, but the recent dry spells have even worsened the situation as summer crops were beginning to show moisture fatigue.
Economic reforms that saw the country abandon the long used multi-currency system in favour of a system that floats the local currency against other currencies has resulted in sharp price increases for goods and services.
The removal of subsidies on fuel, electricity among other commodities have also helped fuel inflation to hyperinflation a situation the World Bank suggests resulted in a 7,5 percent contraction of economic activity in 2019.
“Zimbabwe also suffered a sharp rise in inflation that continued to squeeze real incomes, resulting in a large contraction in economic activity, estimated at 7,5 percent. Activity has been further constrained by persistent shortages of food, fuel, electricity, and foreign exchange,” reads the latest report by the Global Lender.
The bank’s report comes as ZESA is effecting 18-hour power cuts after electricity production at Kariba Dam tumbled as a result of receding water levels.
The other power generator Hwange Power Station continues to experience plant break downs.
The power cuts threaten to drag on an economy stuck in the doldrums for the past two decades.
Meanwhile, Sub-Saharan growth is expected to pick up to 2,9 percent in 2020, assuming investor confidence improves in some large economies,
energy bottlenecks ease, a pickup in oil production contributes to recovery in oil exporters and robust growth continues among agricultural commodity exporters.
The forecast is weaker than previously expected reflecting softer demand from key trading partners, lower commodity prices, and adverse domestic developments in several countries.
In South Africa, growth is expected to pick up to 0,9 percent, assuming the new administration’s reform agenda gathers pace, policy uncertainty wanes, and investment gradually recovers.
Growth in Nigeria is expected to edge up to 2,1 percent as the macroeconomic framework is not conducive to confidence.
Growth in Angola is anticipated to accelerate to 1,5 percent, assuming that ongoing reforms provide greater macroeconomic stability, improve the business environment, and bolster private investment.
In the West African Economic and Monetary Union, growth is expected to hold steady at 6,4 percent. In Kenya, growth is seen edging up to 6 percent.