via Scepticism over economic growth | The Herald December 31, 2013
GOVERNMENT’s upbeat prognosis of economic growth for 2014 has been met with scepticism with some economic analysts saying low farm output, subdued global commodity prices and low Foreign Direct Investment were likely to slow economic growth.The economy is estimated to expand 6,1 percent, driven by mining, agriculture and construction. It will be an improvement from the projected economic growth of 3,4 percent this year.
The Government sees the agricultural sector growing by 9 percent next year, the mining sector will register a 11,4 percent growth while the construction will expand by 11 percent.
Analysts say while the economy will expand in 2014, the level of growth is “unrealistic” particularly for mining and agriculture, the key drivers for the projected overall growth.
“We are sceptical about what we see as overly optimistic GDP growth rates especially for 2014 and 2015,” said Imara Securities. “We anticipate these to be revised down as the year progresses, although we still expect the economy to record some growth albeit at a slower pace.
“In our view, in the absence of inputs as well as irrigation the recovery in agriculture is likely to be lower than the 9 percent anticipated in 2013.”
Regarding mining, commodity prices are likely to weaken and coupled with a lack of significant investment, the growth rate is likely to be lower, in our opinion, especially given the changes regarding deductibility of royalties and the introduction of a tax on unbeneficiated platinum.
Exports of unprocessed platinum and diamonds will from January 1, 2014 attract a “heavy” tax as part of Government measures to prod mining houses into beneficiating minerals and metals locally.
Imara, a local research firm also noted infrastructure bottlenecks such as electricity shortages remain. In the absence of significant FDI, economic recovery would be “slow and painful.”
Economist Mr Gift Mugano said the 6,1 percent growth required some institutional reforms.
“It is rather ambitious because we have serious issues not only at global level, but even domestic,” he said. “For example, the time we are going to take to mine conglomerates (diamonds). There are also leakages of our minerals. So there is need to capacitate institutions like Zimra to make sure the real value comes to Government.”
He, however, said the budget came out well in addressing policy issues that “inspire confidence.” The planned re-introduction of the interbank market and recapitalisation of the Reserve Bank are welcome developments as these are expected to ease the liquidity constraints.
“Nonetheless we are still to see the modalities of the proposed US$100 million interbank markets to be guaranteed by Afreximbank,” said Imara.
“Our initial view is that an injection of new money is unlikely under the programme in which case the liquidity woes are unlikely to subsidise. Furthermore, the five year treasury bills at 5 percent per annum to be issued for the RBZ debt are expected to ease the liquidity crunch depending on acceptance. This nonetheless will not help the physical cash shortage though.”