The Zimbabwean economy is understated as the often reported gross domestic product of $18 billion does not reflect its exact size which is estimated to reach $25,7 billion by the end of this year following the replacement of the old base year, Finance and Economic Development Minister Prof Mthuli Ncube has said.
This was after the Zimstats reviewed the based year from 2009 to 2012 and way of calculating the size of the economy.
Re-basing of national accounts means replacing the old base year used for compiling the constant price estimates to a new and more recent base year.
It is an internationally recognised practice which requires countries to have up-to-date data.
For Zimbabwe, it was more imperative to re-base the GDP figures due to among other reasons, an increase in the number of new business establishments between 2009 and 2012.
There have also been changes in the structure of the industrial activities as well as changes in relative prices of various products in the economy over the same period.
Some activities which had little economic importance in 2009 have gained prominence and now contribute more to the economy than before.”
Re-basing will also make planning and investment decisions more robust and informed in terms of revenue collection, capital spending, external debt and budgeting which can be benchmarked against similar economies.
According to figures made available by Zimstats this week, the country reviewed the base year from 2009 to 2012, pushing the 2017 GDP to $22 billion and per capita income to $1,511, up from a GDP of $17,9 billion and per capita income of $1,235 before the re-basing.
Following the changes, Treasury is now forecasting 2018 GDP to reach $25,7 billion while per capita income is now estimated to close the year at $1 720.
While presenting the country’s latest reform agenda, the Transitional Stabilisation Programme (TSP) that is set to run between October 2018 – December 2020, Prof Ncube revealed that GDP per capita income in the country is estimated to close the year 2018 at $1 720 up from the 2017 figure of $1 511 that was revealed by President Mnangagwa in New York last month.
Addressing the Zimbabwean Diaspora in the United States during an interaction with them, President Mnangagwa said the country’s economy was moving in the right direction and was on a growth trajectory.
The President said: “At the time this dispensation came into office in November last year, the per-capita income was around $900 that time.
“But within eight months, we have moved to $1 500 per capita and we are saying that our goal is to reach $3 500 per capita by 2030 and by then it means we shall become an upper middle-income economy.”
But Prof Ncube said he still thinks the re-based figure is an under-measurement: “We have always said the official GDP is $18 billion, but it’s actually bigger at $25,8 billion, our economy is bigger, it also means that the per capita income is not what we thought, it is of the order of $1 720.”
“Even as things are, things being tough as they are, we can see that the middle-income status is achievable, we are already, technically, at a lower middle-income.”
He said it is now easier for the country to become an upper middle-income economy in line with President Mnangagwa’s vision of making Zimbabwe an upper middle-income economy by 2030.
Meanwhile, Prof Ncube said the TSP prioritises fiscal consolidation, economic stabilisation, and stimulation of growth and creation of employment.
Through the TSP, Government is expected to institute measures that address underlying causes of the high cost of doing business, including inputs supply across various value chains, access to enabling public utilities, domestic cost of finance, and introduction of flexibility in Zimbabwe’s labour laws.
To streamline the civil service wage bill, Government plans to reduce employment costs to 62,5 percent of total revenues by 2020 from 90,6 percent of total revenues in 2017.
It also outlines policies, strategies and projects that will guide Zimbabwe’s social and economic development interventions up to December 2020, simultaneously targeting immediate quick-wins and laying a robust base for economic growth for the period 2021-2030.
Unlike in the past, when Government was at the forefront of economic growth, the economic growth envisaged under the TSP will inevitably be driven by the private sector, with Government facilitating a supportive macro-economic and business environment.
The programme targets quick-win initiatives which relate to per capita income, and the required economic growth rates aimed at creating employment, and poverty reduction. Minister Ncube is targeting an economic growth rate of 6 percent and above per annum from 2019.
Other measures contained in the TSP include debt clearance, which he said will require the country to clear first, and simultaneously, its arrears to the AfDB of $680 million, and the World Bank’s more than $1,4 billion; and then the European Investment Bank’s $308 million.