BY TAURAI MANGUDHLA
ZIMBABWE’S economy will grow by 5,5% next year, Finance and Economic Development minister Mthuli Ncube said yesterday, citing decelerating inflation and higher mineral output.
However, the 2022 gross domestic product (GDP) growth rate announced in the national budget will be much lower than this year’s 7,8% projection.
This year’s growth rate increased at a higher rate compared to that of 2020 when economic activity was battered by pandemic-induced lockdowns, which grounded key sectors including tourism and manufacturing.
The Treasury boss was confident that inflationary pressures would continue declining, averaging 32,6% during 2022.
He projected a year-end annual inflation rate of about 20%.
The Zimbabwe National Statistics Agency said yesterday the rate moved to 58,4% this month, from 54% in October, underpinned by rocketing prices of basic commodities and currency fragilities.
However, the rate is much lower than the 471,3% of October last year.
Further growth is projected in the manufacturing, agriculture, construction and tourism industries, which have been recovering from Covid-19-induced lockdowns.
Presenting the ZW$927,6 billion (about US$8,8 billion) budget, Ncube said growth projections were also premised on assumptions that the 2021/2022 agricultural season would be normal.
The budget deficit for 2022 was projected at ZW$76,5 billion (about US$728,5 million).
He projected that Covid-19- induced hard lockdowns would not inflict further damage to industries next year, possibly as a result of the vaccination campaign, while a stable exchange rate would cool off current jitters.
“Potential risks to the above projected growth include the uncertainty in the future path of the pandemic and exchange rate volatility, which may contribute to high inflation,” Ncube said.
“Other risks relate to underperformance and viability of some of the State-owned Enterprise (SOEs), extreme weather conditions, retreats in international commodity prices and higher than anticipated international oil prices.
“The disinflationary path was underpinned by both tight fiscal and monetary policies. Conservative reserve money targeting and the introduction of the foreign exchange auction system brought stability in the foreign exchange market and consequently inflation. However, the widening of the parallel market premiums to over 50% beginning in August 2021, threatens to reverse the gains made on the inflation front,” he said.
Ncube said recurrent expenditure would constitute 13,4% of GDP, far ahead of growth stimulating capital projects estimated at 5%.
“The 2022 capital budget provides an overall spending plan of ZW$334,2 billion (about US$3,1 billion), including devolution of ZW$42,5 billion (about US$404,7 million),’ he said.
“In this amount, ZW$156,4 billion (about US$1,5 million) is for infrastructure delivery mainly with ZW$10,9 billion (about US$104 million) being for capitalisation of State-owned enterprises whilst ZW$23,5 billion (about US$223,8 million) has been earmarked for capacitation of line ministries in order to enhance public service delivery.”
Employment costs, Ncube said, will chew ZW$340 billion (about US$3,2 billion) which is 40% of revenue.
A provision of ZW$279,2 billion (about US$2,6 billion) was made for non-wage recurrent spending, which includes social benefits.
In addition, the budget is expected to cater for loan repayments of ZW$28,3 billion (about US$269 million) and acquisition of financial assets of ZW$41 billion (about US$390 million).
Currently, the state of public finances has improved significantly, with revenue collections at ZW$317,4 billion (about US$3 billion) against expenditures of ZW$351,7 billion (US$3,35 billion) between January and September 2021, giving a deficit of ZW$434,3 billion (about US$326 million).
“By end of the year, a narrower deficit is projected, to be entirely funded through domestic market borrowing,” Ncube said.
The livestock sub-sector is expected to remain buoyant, on the back of good pasture and water availability.
Growth in mining is estimated to reach 3,4% in 2021, on account of improved performance by all minerals, as well favourable international mineral prices, on the back of strong global demand and ongoing economic recovery.
Going forward, the country will, therefore, continue to leverage its mineral resources in order to achieve the desired mining growth of 8% in 2022 and in line with the US$12 billion mining industry by 2023, Ncube said.
In 2022, manufacturing growth is expected to remain positive and firm at 5,5%, underpinned by continued macro-economic stability and improved access to foreign currency on the formal market, he said.