eBusiness Weekly
Business Writer
Increased domestic industrial output will help insulate the economy from global external shocks, particularly the ongoing Russia – Ukraine war and other trade inconveniences caused by Covid 19, according the Reserve Bank of Zimbabwe.
Rising global oil and food prices have lately had a pass-through effect on the domestic inflation significantly since February 2022, leading the country to miss its initial inflation target.
This seems to derail a relatively stable economic environment experienced last year, and the Central Bank chief Dr John Mangudya is convinced that enhancement of local production will cushion the country from imported inflation.
In 2021 the country recorded a 66 percent growth in manufacturing sector capacity utilisation up from 47 percent in 2020 and 36, 4 percent in 2019.
Indications towards the end of last year showed that locally manufactured products occupied 65 percent of the domestic retail supermarket shelf space.
However, Zimbabwe is susceptible to the influence of some exogenous factors particularly on the food manufacturing front as the sector procures over 70 percent of its raw materials from outside the country.
2021/22 summer cropping season was adversely affected by an uneven rainfall pattern that puts the country in an unenviable position as far as grain sufficiency is concerned.
However, the government has shown indications to ramp up winter wheat production by targeting to plant 75 000 hectares under various models this coming season.
Zimbabwe finds itself in a catch-22 situation as it is one of the biggest net importers of Russian wheat which accounts for approximately 55 percent of the country’s imported wheat given its lower price and good nutrient composition.
Agriculture production and food manufacturing are some of the areas where Zimbabwe can curb imported inflation but there remains a challenge when it comes to commodities like oil and gas which the country does not produce.
Speaking at the 2022 inaugural corporate governance colloquium held by the Institute of Corporate Directors Zimbabwe (ICDZ) on Thursday, Reserve Bank of Zimbabwe Governor Dr John Mangudya represented by Deputy Director Economic Research Division Dr Nebson Mupunga, said increase local production will deter some of the negative effects that come with global socio-economic turbulence.
“Increased domestic output will shield the economy from global exogenous shocks such as Russia- Ukraine, which has resulted in a significant increase in global food prices. The increase in domestic credit has also resulted in the availability of local products in the Zimbabwean shelves,” said Dr Mangudya.
The Central Bank chief upheld the 5, 5 percent economic growth projection for 2022 despite lack of external credit and the adverse effects of the Covid-19 pandemic.
According to RBZ, the economy continues to show strong optimism in 2022 as evinced by Purchasing Managers Index (PMI) produced by ZIMSTAT at 50, 7 percent in the last quarter of 2021, signifying a 10 percentage point increase from 40, 7 percent recorded in the third quarter.
PMI is an index that shows the prevailing direction of economic trends in the manufacturing and service sectors.
This is regardless of some outward headwinds currently afflicting the world’s economies stemming from the ongoing Russia – Ukraine war, which has evidently destabilised economies and pushed global food prices northwards.
“Despite lack of external credit and FDI as well as the devastating effects of Covid 19, most sectors in the economy have shown great resilience reflecting the importance of the domestic financial sector,” he said.
