Govt urged to do more

Source: Govt urged to do more | The Herald 16 JAN, 2020

Govt urged to do more
Prof Mthuli Ncube

Enacy Mapakame

Government needs to do more in addition to reforms in order for the country to realise projected growth as well as full international reintegration and associated support, Old Mutual Investment Group said in its latest monthly brief.

Domestic reforms alone are not enough to bring the desired economic recovery needed in the country.

In his 2020 National Budget, Finance and Economic Minister Mthuli Ncube, projected the economy to grow by 3 percent this year.

Growth is, however, underpinned by the performance of the agriculture sector, which is the anchor for the Zimbabwean economy.

Availability of fuel and electricity also plays a critical role in pushing economic activity around the country.

In 2019, currency instability, inflationary pressures, erratic power supplies and shortages of fuel had an adverse impact on industry activities as hours of production were lost to load shedding.

Old Mutual Investment Group sees unfavourable weather adding a poser to agriculture, which will spill down to the whole economy.

Last year, natural disasters such as drought as well as tropical cyclones that struck parts of Zimbabwe plunged the economy into projected negative economic growth of minus 7,5 percent.

The World Bank sees the economy growing by 2,7 percent on the back of the contraction last year on the back of foreign currency shortages, inflationary pressures and natural weather phenomena.

While the World Bank projects negative growth of 7,5 for 2019, Minister Ncube sees his projected 3 percent growth this year, reversing a 6,5 percent contraction forecast for 2019, due to the devastating effects of drought and Cyclone Idai.

Fears of a bad rainfall season have already emerged that pose a threat to the performance of the agriculture sector this year, a sector that accounts for an estimated 70 percent of raw materials required in manufacturing and employing three quarters of the country’s employable population.

Performance of the global commodities market is also expected to play a critical role in the performance of the economy as a whole, although Minister Ncube announced a raft of incentives to jump-start the economy this year by supporting mining, tourism, agriculture, industry and other key sectors of the economy.

Zimbabwe, like many other SADC countries is heavily reliant on commodities exports especially tobacco, gold and other mineral products.

As such, the OM sees prospects in the near future not so bright for the country.

“Symptoms of political-economy policy relapse threaten full international reintegration and associated support,” said OM in their latest monthly brief.

“Domestic policy reforms seem inadequate to deliver sustainable recovery, more so given adverse externalities such as drought and international commodity vulnerabilities. We maintain a flat to negative outlook over the foreseeable outlook,” said the group.

According to the World Bank’s latest outlook report, growth among advanced economies as a group is anticipated to slip to 1,4 percent this year, in part due to continued softness in manufacturing.

Growth in emerging markets and developing economies is expected to accelerate this year to 4,1 percent.

For Zimbabwe, its growth forecast this year falls behind most African countries, but is ahead of Zambia and South Africa.

Already, reforms under the Transnational Stabilisation Programme (TSP) have laid the foundation for inclusive growth and already received a thumps up from the international world, creating renewed interest in the re-engagement process.

Government has also extended several fiscal incentives that will result in Treasury foregoing an estimated US$1,5 billion in potential taxes to reignite growth, but this will create new value of US$15 billion for businesses.

Treasury also expects the domestic economy to rebound on further implementation of ongoing reforms to improve the ease of doing business.

Enhanced productivity and growth, job creation, competitiveness, promotion of sustainable and inclusive development, export diversification as well as import substitution support by global re-engagement are among the key priorities set forth by Government.