Africa Moyo and Tawanda Musarurwa
Zimbabwe’s Gross Domestic Product (GDP) is expected to rise significantly in 2020, after a number of exogenous factors conspired to flat-line economic growth this year, Finance and Economic Development Minister Mthuli Ncube has said.
With Zimbabwe’s GDP growth for 2018 projected to have risen by 6 percent, growth for 2019 is expected to hit the same figure.
“Basically, the impact of the challenges such as the drought, Cyclone Idai, fiscal consolidation challenges, are impacting economic growth,” said Minister Ncube on the side-lines of his State of the Economy address.
“So we expect economic growth to be flat this year in line with those challenges and constraints that we are experiencing. But we expect a recovery in 2020.”
In presenting the State of the Economy report, Minister Mthuli said a presently convoluted global economic matrix was not helping either since Zimbabwe is largely a price-taker.
“Trade tensions between the United States and China, which were showing signs of thawing are actually flaring up again, causing larger disruptions in the global trade and supply chains. Certainly, the United Kingdom’s departure from the European Union, termed Brexit, is causing a number of risks in the Eurozone and the global economy. These developments represent a drag in global trade in general and are also reflected in lower commodity prices in particular,” said the Minister.
Economic performance going forward will be driven by Government’s prudent fiscal policy underpinned by adherence to fiscal rules, as enunciated in the Public Finance Management Act, together with financial rules. These reforms also reprioritise capital expenditure through commitment to increase the budget on capital expenditures from 16 percent of total budget expenditures in 2018 to over 25 percent in 2019 and 2020.Some of these measures, which are enunciated in the Transitional Stabilisation Programme (TSP) and 2019 National Budget have resulted in numerous positive outcomes
“Fiscal consolidation and stabilisation measures in the TSP and the 2019 National Budget are paying dividends, with revenue collection in the first quarter of 2019 performing above target by $146 million while expenditures were contained below the target by $218,9 million,” he said.
“As a result, a budget surplus of $443,1 million was realised during the quarter, creating an additional space of financing social development programmes and unforeseen exigencies related to drought and the impact of Cyclone Idai.”
Also on a positive note, cumulative tax and non-tax revenue collections in the first quarter of the year jumped to a record $1,9 billion against a target of $1,8 billion, resulting in a positive performance of $146 million or 8,2 percent.
The Finance Minister attributed the improved tax revenues to the strengthening of the Zimbabwe Revenue Authority (Zimra) collection systems and plugging of tax loopholes.
The intermediated money transfer tax (IMMT) — commonly known as the 2 percent tax — generated monthly averages of $95 million against a target of $50 million. And the upward review of excise duty on fuel also generated revenues of $146 million in February, and Prof Ncube expects the various revenue collection measures to see the country generating $9,6 billion by end of the year.
Key economic sectors such as mining and manufacturing are expected to boost their contribution to the country’s GDP going forward.
Minister Ncube is confident that overall output targets for the year “are achievable” with most targeted minerals such as gold, nickel and platinum producing more than 20 percent of total expected output for the year. This year’s target for gold production, for example, is 40 tonnes, up from last year’s 33 tonnes.
In respect of the manufacturing sector Minister Ncube said: “In the outlook, the performance of the sector is expected to benefit from improved investment following the latest round of ease of doing business reforms, and the enactment of the ZIDA Bill, which is now before Parliament.
“In addition, the Local Content Policy Bill is being finalised and also the Industrialisation Policy being finalised by the Ministry of Industry and Commerce will support domestic firms to increase production through utilisation of local factors of production.”
He said it remains critical for Government to explore private sector financing facilities required to support industry’s recovery, production and export growth.