AfDB projects 4,6pc Zim growth

Source: AfDB projects 4,6pc Zim growth | The Herald February 5, 2020

AfDB projects 4,6pc Zim growth
The African Development Bank

Golden Sibanda Senior Business Reporter
THE African Development Bank (AfDB) has given the most optimistic forecast thus far of economic rebound in Zimbabwe this year after the lender projected the domestic economy to grow by 4,6 percent.

The regional banking group, however, noted that the anticipated economic expansion, after it projected contraction of 12,8 percent for 2019, will depend on the correct policy interventions being instituted for macro-economic stability and recovery.

Finance and Economic Development Minister Mthuli Ncube projected in his 2020 national budget that the economy will rebound by 3 percent this year from drought and cyclones (Idai and Kenneth) induced decline of 6,5 in 2019.

The World Bank and International Monetary Fund have also projected growth for Zimbabwe, although revised down from initial forecast of 3,8 percent to 2,7 percent this year, assuming better rains, improved power supply and higher commodity prices.

AfDB believes Zimbabwe’s economy may rebound with GDP growth of  4,6 percent  in  2020  and  5,6 percent  in  2021  if appropriate  corrective  measures are taken especially to restore macro-economic stability.

Recovery in agriculture, mining and tourism sectors will be backed by increased public and private investments. Dialogue with civil society and political actors is also expected to result in a social contract that drives recovery.

However, agriculture, which is expected to improve on account of better rains this season, might still be affected by erratic and below normal rainfall being received in some areas, while seed producers also say seed sales this year declined.

The multi-lateral African lender said agriculture shrank about 15,8 percent in 2019 due to cyclone  Idai,  prolonged  drought,  livestock  diseases, and currency shortages reducing the availability  of  inputs.

“Vast natural resources, fairly good public infrastructure and a skilled labour force give Zimbabwe an opportunity to join supply chains in Africa and increase trade in the African Continental Free Trade Area,” AfDB said.

AfDB said headwinds such as high  and  unsustainable  debt and  fiscal  deficits,  cash  shortages,  limited  foreign exchange  and  persistent  shortages  of  essential  goods  are  hampering meaningful economic recovery.

And as the economy saunters under the weight of a litany of constraints, Government has faced extreme challenges to allocate enough resources for development spending and social service provision continue to be constrained.

AfDB said as the Zimbabwe dollar depreciates, local creditors lose the value of both their loans and payments on goods and services supplied to  Government and external debt service becomes more expensive.

The bank forecast Zimbabwe’s GDP to have contracted by  12,8 per cent in  2019  due to poor performance in mining,  tourism,  and  agriculture.  Foreign currency and electricity shortages affected mining and tourism.

Despite a  global mineral price recovery,  production in  Zimbabwe dropped below  2018  levels.  Austerity measures through the Transitional Stabilisation Program 2018–20 and attendant monetary reforms constricted economic activity.