Zimbabwe economy to grow by 4,2pc: AfDB . . . Need to overcome numerous headwinds . . . Economy performed better than expected in 2018

18 Jan, 2019 - 00:01 0 Views
Zimbabwe economy to grow by 4,2pc: AfDB . . . Need to overcome numerous headwinds . . . Economy performed better than expected in 2018 The African Development Bank headquarters

eBusiness Weekly

Kudzanai Sharara
Zimbabwe’s economy will grow by 4,2 percent this year and 4,4 percent in 2020 despite facing an array of headwinds, the African Development Bank (AfDB) has said in its 2019 African Economic Outlook.

The AfDB listed the headwinds being experienced in Zimbabwe as policy-related macroeconomic instability; lack of funding, land tenure, and investment regulations; high input costs and outdated machinery; government bureaucracy; and inadequate infrastructure, particularly energy.

The regional bank said all the headwinds remain key challenges for private sector development.

It added that: “The high and unsustainable debt-to-GDP ratio; the high fiscal deficit; the cash shortages, three-tier pricing, and limited availability of foreign exchange, which continue to constrict economic activity; and the persistent shortage of essential goods, including fuel and consumer goods, remain the major headwinds for any meaningful economic recovery”.

Despite all this, said the AfDB, the economy is still expected to grow by 4,2 percent on the back of the agricultural and mining sectors. The growth rate is higher than Government’s 2019 growth projection of 3,1 percent and the World Bank’s projection of 3,7 percent.

“The agricultural sector and mining are expected to be the main drivers of growth, backed by increased public and private investment.

The regional bank however called for increased investment if the country is to realise any growth.

“Zimbabwe has opportunities requiring minimal additional investment to realise medium-term growth targets.

“In particular, measures are needed to increase transparency in the mining sector, strengthen property rights, reduce expropriation concerns, control corruption, and liberalise the foreign exchange markets.”

The AfDB said Zimbabwe could also benefit from trade within the continent, given the vast natural resources, relatively good stock of public infrastructure, and comparatively skilled labour force.

“Zimbabwe has an opportunity to join existing supply chains in Africa through the Continental Free Trade Area,” said AfDB.

Commenting on the country’s performance in 2018, the AfDB said the Zimbabwean economy had performed better than expected in 2018, expanding by an estimated 3,5 percent, driven by agriculture, supported by relatively peaceful elections.

This was achieved despite experiencing cash shortages and the three-tier pricing system coupled with foreign exchange shortages which continued to constrain the goods and factor markets.

The regional bank said the country’s protracted fiscal imbalances have constrained development expenditure and social service provision, undermining poverty reduction efforts.

The fiscal deficit was an estimated 10,7 percent of GDP in 2018, compared with 12,5 percent of GDP in 2017, financed mainly through domestic borrowing.

In 2018, the Government proposed addressing the unsustainable budget deficit with strong fiscal consolidation measures. The fiscal deficit was driven mainly by election-related spending, civil servant salary increases, and transfers to the agricultural sector, said AfDB.

Total external debt was an estimated 45,3 percent of GDP in 2018, down from 53,8 percent in 2017. The current account deficit was an estimated 3,7 percent of GDP in 2018, with merchandise imports continuing to exceed exports, putting pressure on the supply of urgently needed foreign exchange and making it critical to diversify exports.

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