Business Writers
Zimbabwean analysts and economists are divided in their assessments of the country’s economic prospects for this year, with some expressing optimism while others are harbouring concerns.
While some are cheering recent currency stability and anticipate a rebound in key sectors like tourism and mining, concerns linger over the impact of tight monetary policy on businesses, the prospects of the agricultural sector and the persistent threat of energy challenges.
Currency stability, achieved through tight monetary policy, has been a point of contention.
While some economist believe it will endure, others warn the resulting liquidity crunch is hindering businesses and stifling economic growth.
The liquidity crunch has severely curtailed banks’ ability to lend to productive sectors. Even companies with approved loan facilities are struggling to access the funds they need, hindering investment and economic growth.
The agricultural sector, a crucial pillar of the economy, faces uncertainty despite recent rains. Analysts question whether the projected growth levels, predicated on the La Nina weather pattern, will be realised.
The energy sector, too, remains a major concern, with frequent power outages likely to impact productivity across various sectors.
Conversely, the mining sector is anticipated to benefit from a surge in global gold prices, with projections exceeding US$3 000 per ounce. The tourism sector is also poised for a rebound, driven by a resurgence in international travel.
Economist Gladys, Shumbambiri-Mutsopotsi, expressed concern that Zimbabwe’s agriculture sector, a key contributor to GDP, may underperform due to late rains, potentially slashing expected growth rates. However, Shumbambiri-Mutsopotsi remains optimistic about the tourism sector.
“As more countries emerge from economic stagnation, international travel is set to rebound, benefiting nations like Zimbabwe with untapped tourism potential,” Shumbambiri-Mutsopotsi said.
“As for the banking sector, interest rates in Zimbabwe are expected to remain high, despite easing inflation.
Raymond Madziva, a banker, anticipates that the Reserve Bank of Zimbabwe will maintain its cautious stance, suggesting that tight liquidity conditions may persist.
“The central bank is unlikely to reduce rates significantly, given concerns over currency stability,” he said.
Madziva cautioned that without robust foreign exchange inflows, the ZiG could face renewed pressures.
Economics Professor, Gift Mugano, said the biggest challenge would be the restoration of confidence, especially after the 43 percent devaluation of the ZiG against the US dollar in September last year. He argued that this significant devaluation has severely eroded public confidence in the currency, and the confidence deficit is likely to spill over into 2025.
“You know that the ZIG crashed in September 2024, that in itself is what the bearing on sustainability of the currency from a confidence point of view, because when the ZiG was launched, they said it was backed by gold,” said Prof Mugano.
“But the underlying fundamentals were not strong (due to) the absence of sufficient reserves, lack of production, and also lack of demand for the currencies.
“Those who had some hope on it, after it crashed, their hopes were shattered. And so, we are spilling over into 2025 with the same conditions which resulted in the currents collapsing.”
Mining analyst, Michael Wushe, said gold is expected to remain a sought-after asset in 2025, driven by geo-political tension.
He noted that gold prices reached a peak of US$2 778 per ounce in October 2024, although they have since moderated slightly. Another mining analyst, Allan Kumbeni, concurred, predicting that sustained demand will keep gold prices elevated, with an average forecast of US$2 552 per ounce for the year.
“Geopolitical tensions, particularly in the Middle East and between the US and China, are driving investors to gold. This trend is unlikely to abate in the near term,” Kumbeni remarked.
However, risks remain. A stronger US dollar or delays in its central bank rate cuts could weaken demand for gold. Furthermore, subdued consumer spending in India and China may dampen physical gold purchases.
The lithium market faces a mixed outlook in 2025. While electric vehicle (EV) adoption continues to drive long-term demand, the market is expected to undergo a period of adjustment.”.
“Short-term demand has softened due to a cyclical slowdown in EV sales and reduced subsidies in China,” said Kumbeni.
Meanwhile, supply expansions in Australia and Latin America have led to an inventory surplus, pushing spodumene prices down to a forecast average of US$878 a tonne in 2025.
Emerging African producers, including Zimbabwe, are starting to contribute to global supply. However, resource nationalism in Latin America and delays in new mining projects could present upside risks for prices, which are expected to rebound by 2026.
The global energy sector is undergoing a transformation, with renewable energy gaining traction.
Dr Tendai Moyo, an energy consultant, predicts that Zimbabwe will see incremental growth in solar and wind projects in 2025.
“While progress has been slow, the government’s recent policy incentives for renewable energy investment are starting to yield results,” Dr Moyo said.
However, Zimbabwe’s energy sector still grapples with challenges, including aging infrastructure and limited financing. Dr Moyo emphasised the need for private sector involvement to bridge the energy gap.
Industrial growth in Zimbabwe will depend on resolving structural inefficiencies. Dr Nxaba Ndiweni, an industrialist, highlighted that while some sectors are poised for recovery, others face significant headwinds.
“Manufacturing remains constrained by high production costs, unreliable electricity supply, and limited access to foreign exchange,” Dr Ndiweni explained.
However, the Government’s push for value addition in mining and agriculture could provide a much-needed boost to industrial output.
Dr Ndiweni also noted that regional trade agreements, such as the African Continental Free Trade Area (AfCFTA), present opportunities for Zimbabwean businesses to expand their markets.
“The key will be improving competitiveness and reducing bureaucratic hurdles,” he
added.
