eBusiness Weekly
Business Writer
Zimbabwe’s economy could shrink by 10 percent this year, the worst in 17 years, according to the World Bank’s forecasts released as part of its Global Economic Prospects June 2020 report.
The economic contraction, which is at a negative 12,7 percent variance with the World Bank’s last projection of a 2,7 percent growth made in January, would represent the deepest recession since 2003 when the economy contracted by 17,2 percent.
Although much of the downturn can be attributed to the Covid-19 pandemic, Zimbabwe was always going to struggle for growth following consecutive droughts and policy missteps.
The World Bank says in addition to its heavy toll on health and safety, efforts to contain the spread of the virus — such as travel restrictions, border closures, and national lockdowns — Covid-19 has disrupted the functioning of economies, Zimbabwe included.
Sharply lower growth in major trading partners such as South Africa, which is forecast to shrink 7,1 percent, as well as a collapse in commodity prices are expected to weigh heavily on exports. Zimbabwe generates the bulk of its foreign currency from exports of commodities such as gold, platinum and tobacco.
The World Bank said countries that have been most affected are those with weak health systems and large tourism sectors.
Zimbabwe was expecting to earn as much as US$1,4 billion from tourism this year, but Tourism and Hospitality Industry Minister Mangaliso Ndlovu has projected a US$1,1 billion shortfall in the worst case scenario.
Zimbabwe’s plight has also been exacerbated by its failure to access global finance mainly because it is in arrears with global lenders such as the World Bank and the African Development Bank.
Of the US$2,2 billion that President Mnangagwa said is needed as humanitarian aid over the next 12 months from April 2020, the country has only managed to get US$184 million from development partners which included the European Union, the United States, Global Fund, World Bank, United Nations and China, among others, according to Finance and Economic Development Minister Mthuli Ncube.
Failure to get much of the required funding will, however, have serious ramifications for the local economy according to Minister Ncube.
He told the Parliamentary Committee on Budget and Finance early this month that Zimbabwe’s economic growth would be impacted negatively by the Covid-19, especially tourism and diaspora remittances, where the country used to receive US$1 billion per year.
Ncube reportedly told the IMF that without a transformative arrears clearance and re-engagement plan the Zimbabwe economy could contract by as much as 20 percent.
Across Sub-Saharan Africa region, the World Bank expects activity in the region to contract by 2, 8 percent this year—the sharpest contraction on record and 5.8 percentage points weaker than previous forecasts.
The fall in per capita GDP is bound to be even deeper, likely causing millions in the region to fall back into extreme poverty.
Growth in the Sub-Saharan Africa region is expected to rebound to 3,1 percent in 2021 with Zimbabwe growing by 2,9 percent.
However, the outlook is subject to substantial uncertainty.
