The World Bank has forecast Zimbabwe’s economy to grow by 2,7 per cent this year, a growth that almost tallies with Finance Minister Mthuli Ncube’s 2020 National Budget projection of 3 per cent.
However, the shortage of foreign currency and electricity are expected to persist in 2020 and weigh down the recovery of industry and services. The World Bank expects Zimbabwe to post modest, but slower growth of 2,5 in 2021, but growth to pace up at 2,8 in 2022. Zimbabwe’s forecast growth this year falls behind most African countries but is ahead of Zambia and South Africa.
Growth this year, however, is premised on the assumption of better rainfall, improved macro-economic stability from tighter fiscal and monetary policies, improved power supply and supportive tax and non-tax incentives to stimulate production. As the economy rebounds, inflation is expected to gradually decline, with the monthly rate projected at single digits from March 2020. Inflation is thus forecast to decline further to 2 per cent by 2020 year-end, on tighter control of reserve money.
Meanwhile, according to the United Nations, Zimbabwe’s economy will register a negative growth 2.5% in 2020 from a negative 5.5% growth in 2019 owing to foreign currency shortages, elevated public debt and uncontrolled inflation, a recent report shows. It is, however, poised to grow by 3% in 2021.
This year’s projection is against the 2.7% and 3% forecast by the World Bank (WB) and the Treasury.
“In Zimbabwe, economic and financial conditions have deteriorated substantially, prompting the return of hyperinflation,” UN stated.
The short-term risks across African sub-regions are tilted to the downside. On the domestic front, agricultural output is highly exposed to weather-related shocks, with potential for dire economic and social consequences. Political conflicts, social instability and security concerns, UN said, are major downside risks across the continent which can affect the short-term outlook in many countries in the region. “There is also an elevated risk that difficult economic conditions in some countries in southern Africa could become more entrenched, leading to more prolonged recessions in Angola, Namibia and Zimbabwe.
The upsurge in external sovereign bond issuances has also raised debt sustainability concerns in some countries, which could be exacerbated by external or domestic shocks, including slippages in fiscal management.” UN noted that elevated public debt is a challenge in several African countries, limiting the capacity to implement counter-cyclical and socially inclusive policies. Public debt levels exceeded 100% of GDP in countries such as Cape Verde, the Congo, Djibouti, Eritrea, Mozambique and Sudan.
So which is which? Almost a full month into the year and some of the assumptions these forecasts are based on are beginning to fall away. The rainfall season doesn’t look to be significantly better than the last one, if at all better. That will affect both agriculture and power supply as infrastructure has not changed though the government plans to focus on it in 2020. The foreign currency situation has certainly not improved and industry still faces trouble. All this combined with the fact that our economy was expected to grow 4.4% in 2019 only to be revised multiple times to the final point of 7% contraction we are likely in for another rough year.