Covid-19 curtails economic growth — ZNCC

Source: Covid-19 curtails economic growth — ZNCC | The Herald

Covid-19 curtails economic growth — ZNCC

Enacy Mapakame Business Reporter
The Zimbabwe National Chamber of Commerce (ZNCC) projects economic growth to contract by 9 percent in 2020 as businesses across all sectors battle low production and revenue losses due to Covid-19-induced lockdowns.

Zimbabwe effected a 21-day national lockdown on March 30, 2020 as part of efforts to contain the spread of the virus.

President Mnangagwa has since extended the lockdown by an additional 14 days expected to end on May 03.

Local businesses have suffered due to the effects of the pandemic with production time lost as companies implement measures to limit the spread of the virus.

A survey by the ZNCC on the effects of Covid-19-induced lockdowns revealed businesses are losing production time subsequently resulting in reduced production output as well as revenue losses.

As such, these effects are seen cascading to the whole economy with GDP expected to decline.

“Given the impact of Covid-19, which has resulted in contraction of economic activity across all sectors, we project that the economy is going to decline by at least 9 percent in 2020,” said ZNCC in their survey report.

“From the 2020 budget projections, the economy was projected to register a 3 percent  growth, which was too optimistic, given that in 2019 economic growth was revised downwards to -6,5 percent in 2019,” said ZNCC.

Covid-19-led economic decline will not be unique to Zimbabwe alone, but is a global phenomenon.

According to the World Bank, economies in the Sub Saharan Africa region will experience a contraction in GDP as agriculture production declines together with the tourism sector, which has been affected by travel restrictions resulting in some hospitality groups closing their facilities. Reduced agriculture production is also seen driving millions in the region into poverty and hunger and demanding food relief.

According to the ZNCC survey report, low economic activity will also result in reduced revenue collections. As such, a budget deficit of more than 5 percent is projected.

Said ZNCC: “Given that there is contraction in economic activity across key sectors, business operations are being weighed upon by Covid-19 — the pandemic is already weighing on employment; revenues for 2020 will be affected.

“As a result, we project a budget deficit of more than 5 percent of GDP. Government expenditure is going to increase due to the effects of Covid-19.”

According to the 2020 National Budget, revenue collections were estimated at $58,6 billion and budget deficit of $5 billion, which is 1,5 percent of the GDP.

The companies that participated in the ZNCC survey have already indicated revenue losses during the initial 21 days of the lockdown.

Of the 210 companies that took part in the survey, 27 percent indicated they had lost more than $5 million in revenue during the initial 21-day lockdown period, and is expected to worsen following the extension of the lockdown period by another 14 days.

Those that lost revenue of below $1 million made up 48 percent of the total respondents.

They indicated that they lost production time as employees were working from home to minimise the spread of the virus.

In terms of employment, 25 percent of permanent formal jobs will be lost and 75 percent of casual/temporary formal jobs will also be lost as businesses lay off workers given the sharp contraction in many sectors.

The tourism sector will be the most hard hit as it is expected to shed almost 25 percent of the total formal sector employment followed by the manufacturing sector.

Businesses have, however, highlighted the economy was already in a dire situation post lockdown due to the inflationary environment and foreign currency shortages among other challenges. As such, a partial lockdown would be ideal to allow businesses to operate but within the recommended parameters that reduce the spread of the virus. Tax relief measures, exchange rate management as well as downward rental reviews will be necessary to give businesses breathing space.