eBusiness Weekly
Tapiwanashe Mangwiro
The African Development Bank (AfDB) has projected the country’s economic growth to further shrink in 2023 due to power outages and challenges associated with elections — only registering 2,8 percent — but Zimbabwe insists the economy will bulk 3,8 percent.
Projected economic growth for 2023 by the bank is 2,8 percent which is 0,2 percent lower than the 3,0 percent estimated for 2022. However, AfDB projects that the country will recover to a growth rate of 2,9 percent in 2024.
Despite the adverse impacts caused by Covid -19 and other global shocks like supply chain disruptions caused by the conflict in Ukraine, Zimbabwe remained resilient, recording growth in 2022.
In 2023, the economy is projected to record economic growth supported by increased agriculture production with normal to above normal rainfall. The country is said to receive this ongoing cropping season. However, the World Bank (WB) has maintained that Zimbabwe’s economy will grow by 3,6 percent this year against the Government’s 3,8 percent growth targets.
According to the WB global economic prospects report for January 2023, Zimbabwe’s growth prospects are in line with the Sub-Saharan Africa region growth which is also at 3,6 percent in 2023.
The Government’s forecast of 3,8 percent in 2023 will be sustained mainly by mining, construction and agriculture and tourism.
These will be sustained by gains that have been achieved on economic stability largely as a result of Government measures on inflation and exchange rate.
Despite maintaining the growth projections, the WB notes that geopolitical tensions, global economic shocks, rising food, oil and commodity prices have led to a slash in growth targets for most economies, including Zimbabwe.
Economic research firm Morgan & Co has also cast a gloomy economic outlook for the country ahead of the up-coming general elections citing the effects of political tensions already brewing.
“2023 is an election year for Zimbabwe and it will be characterised by volatility. The stakes are high and politics will have a strong impact on the economic direction of the country,” said the research firm.
“Clearly the turbulence of 2022 weighs heavily on our investment outlook for 2023 with implications ranging from inflation, interest rates, and earnings valuations to investor sentiment. Zimbabwe has gone through episodes of economic recessions and the political environment has not changed given that international isolation, uncompetitiveness, corruption and a colossal debt overhang remain.”
Zimbabwe’s economy is currently faced with a weak currency, exchange rate volatility, energy crisis, low levels of investment and policy inconsistencies.
“An analysis of past events in Zimbabwe indicates that it is very likely to experience some level of political violence in 2023. Political violence towards and during polls has always been a big issue,” the report says.
“For example, in January 2019, protests broke out in major cities after the government more than doubled fuel prices to tackle fuel shortages and the black market. In addition, the Government ordered a partial internet shutdown and mobile and internet services providers were ordered to block citizens from social media sites.”
According to analysts, the economic impact of the 2019 January political violence and the subsequent internet shutdown spread into hundreds of millions of American dollars in losses for the economy.
Economist Dr Prosper Chitambara, said the projections on their own are positive and they acknowledge that there are a number of things that the Government has done right to maintain the economy on a growth trajectory.
He said these include the improvement of public spending on infrastructure which is a positive development for the economy.
“There has been significant progress towards liberalisation of the markets of the economy but there is room for further liberalisation. This position was recently highlighted by the International Monetary Fund (IMF),” he said.
Chitambara said forecast normal rainfall patterns will result in a good agriculture season which will help the sector to improve its contribution to the economy.
“Normal rains will also improve water bodies for hydro electricity generation as power has been a setback especially in recent times,” he said.
He indicated that the mining sector is poised to do well riding on commodity prices which continue firming.
He added that agriculture will be better than last year and the rebound will positively impact other sectors of the economy such as manufacturing.
Local industry players say capacity utilisation is likely to decline in 2023 exacerbated by the looming power outages and the high bank policy rate which has undoubtedly grown to limit borrowings on part of companies.
Confederation of Zimbabwe Industries (CZI) president, Kurai Matsheza, reiterated that the obtaining power deficiency was undoubtedly going to hinder industry operations adding on to limitations that have been brought about by the 200 percent interest rate.
“There are a number of issues that are pulling us back, firstly the power issue, those in production are not able to produce as much as they should due to the unreliability of power supply, that is adding to the 200 percent interest rate that has been hitting our operations,” said Matsheza.
According to the players this is likely going to be compounded by the intensifying dollarisation of the economy which will certainly compromise the industry’s competitiveness in face of imports that keep making into the country informal channels.
Companies particularly in the manufacturing sector have since indicated that the tight monetary policies introduced in the third quarter of 2022, have weakened aggregate demand and entities growth as liquidity constraints continue to manifest following the announcement of policy pronouncements.
