Source: ‘Zim economy to improve in 2018’ – DailyNews Live
BUSINESS WRITER 9 January 2018
HARARE – Zimbabwe’s economy is expected to perform better in 2018 compared
to last year due to a stable political environment, financial analysts
have said.
The country’s economy was estimated to have grown by 3,4 percent in 2017
on the back of a improved agriculture season and gains in the mining and
tourism sectors.
A 2018 survey carried out by the Investments Professionals Association of
Zimbabwe (Ipaz) in January 2018 to gauge its members’ views on key
economic indicators revealed that the country’s economy is earmarked for a
major rebound.
The positive sentiment on the economic outlook is arising as a result of
the political changes which occurred in the last quarter of 2017, with
long serving former president Robert Mugabe resigning after military
intervention and mass demonstrations in November.
Mugabe, who ruled the country with an iron first for 37 years, was
subsequently replaced by former vice president Emmerson Mnangagwa.
Economic growth according to the analysts will be driven by the envisaged
stable political environment following the change of political
administration, improved business confidence and anticipated turnaround
from key sectors of the economy like the agricultural and mining sector
Majority of members constituting 80 percent of the respondents are
optimistic about 2018 economic prospects with 7,14 percent being even more
bullish.
None of the respondents expect worse than 2017 performance while 10,71
percent expect no change.
Analysts noted that there seems to be political will in the new political
administration for economic development bolstered by the pronouncements in
the 2018 National Budget which proposed among other things to curb
corruption, improve capital flows and re-engage the international
community.
Responding to prospects of the 2018 government budget deficit projection
of $700 million being achieved, 67,86 percent believed it is likely to be
missed while 32,14 percent said it is likely to be achieved.
The respondents argued that election costs were likely to exceed budgets
while costly populist policies are likely to be pursued to win some votes.
The majority of respondents at 70,37 percent said the Reserve Bank of
Zimbabwe (RBZ) savings bonds are not appealing to institutional investors
mostly because of lack of confidence in the bonds and the central bank as
an institution.
Moreover fixed income instruments are out of favour due to inflationary
fears, 29,63 percent, however, believed the savings bonds are appealing to
institutional investors.
However, 55,55 percent of the members surveyed said RBZ savings bonds will
not impact investment rates largely because not many institutional
investors consider the RBZ as a policy guide on rates as they do not have
the instruments to control monetary policy.
On the effectiveness of the RBZ bonds in mopping liquidity on RTGS, 66,67
percent said there is no short to medium term impact on liquidity because
the liquidity problem is systemic and the RBZ cannot address liquidity but
can only manipulate its extent, 33,33 percent said liquidity will tighten.
More than half of the chartered financial analysts and Ipaz members said
it is better for RBZ to onward lend savings bond proceeds to central
government, as opposed to the current practices because it will introduce
discipline as the available resources will be limited.
46,15 percent said it is not better for RBZ to onward lend bonds to
central government because the effect is the same with the issuing of
Treasury Bills.
Analysts believe the agriculture sector will grow fastest in 2018 followed
by the mining, tourism, financial services and manufacturing , in that
particular order.
In addition they believe also that Command Agriculture will boost
agricultural output but rainfall has more impact on the output thus
underlining the importance of investing in irrigation systems.
Responding to the sustainability of the funding model for Command
Agriculture, 81,48 percent said it is not sustainable mostly because the
funding model is backed by subsiding the final output.
The survey projected inflation of between 5,0 percent and 10 percent in
2018.
Ipaz is a recently established association of Chartered Financial Analysts
(CFA) charter holders in the country and those in other countries but with
Zimbabwean links. For this initial survey, 28 members participated.
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