World Bank maintains Zim’s economic growth target

13 Jan, 2023 - 00:01 0 Views
World Bank maintains Zim’s economic growth target World bank

eBusiness Weekly

Nelson Gahadza

Senior Business Reporter

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.

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.

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.

Finance and Economic Development Prof Mthuli Ncube presenting his mid- term budget review in 2022 revised the gross domestic product (GDP) growth target downwards due to increasing inflationary pressures and geopolitical tensions.

Initially the Minister had forecasted growth for 2022 at 5,5 percent but after taking everything into consideration, growth was reviewed downwards to 4,6 percent.

Despite the revised growth projections, the WB estimates show that Zimbabwe is still outpacing several regional economies.

The domestic economy is still projected to record increased activity in the sectors of mining, agriculture, construction and tourism

Economist Dr Prosper Chitambara said 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 liberalization. This position was recently highlighted by the International Monetary Fund (IMF),” he said.

Dr 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 hydroelectricity 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 to firm.

He added that agriculture will be better than last year and the rebound will positively impact other sectors of the economy such as manufacturing.

The IMF recently recognised Government’s efforts to stabilise the local foreign exchange market and lower inflation and the swift tightening of monetary policy along with greater official exchange rate flexibility and a prudent fiscal stance are policies as a step in the right direction and have contributed to a narrowing of the premium in the parallel foreign exchange market.

In addition, it said the authorities have identified large payments to suppliers, the result of over-invoicing, as a source of pressure on the parallel market and in response have launched value-for-money audits and introduced measures to strengthen procurement regulations.

Another economist Mr Clemence Machadu said the Government has done well in setting fairly strong macroeconomic foundations upon which this growth is now building.

He said last year, authorities addressed some of the most problematic factors that were causing market distortions, speculative behaviour, rent-seeking tendencies, volatilities as well as price and exchange rate instabilities.

“The import substitution measures that were implemented in sectors such as wheat and some manufacturing subsectors and supportive measures for the mining sector fostered increased production.

“The tourism sector also started to emerge, after being subdued for a couple of years during strict lockdowns,” he said.

He noted that the manufacturing sector will also drive economic growth, supported by improved linkages with other sectors.

Meanwhile, according to the WB report, recent improvements in public finances within Sub Sahara Africa economies are expected to provide some room for policy support such as the extension of Covid-19 relief grants.

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