Zim economy to grow by 1,6%

Source: Zim economy to grow by 1,6% – NewsDay Zimbabwe May 24, 2016

ZIMBABWE’S economy will grow by 1,6% this year on the back of anticipated expansion in three sectors, including the financial industry, a new report has shown.


According to the African Economic Outlook 2016 report launched yesterday, other sectors expected to aid the growth include tourism and construction, but it warned that the fiscal space remained constrained due to the underperformance of domestic revenues and high recurrent expenditure.

In his 2016 national budget, Finance minister Patrick Chinamasa had projected a 2,7% rise in gross domestic product driven by a growth in mining, tourism, construction and the financial services sectors.

The report — a joint effort by the African Development Bank, OECD Development Centre and United Nations Development Programme — said fiscal space has been constrained due to depressed exports, limited foreign direct investment and other capital inflows into the country.

“This has undermined development expenditure and social services provision in both urban and rural areas, exacerbating the incidence of poverty. Financing for urban development, both housing and transport, has been negatively affected,” it said.

The report said Zimbabwe remained in debt distress worsened by a lack of diversified export base and declining terms of trade, which makes it difficult for the country to adjust to changing world demand for tradable goods.

“These structural weaknesses have constrained the country’s ability to generate high and sustainable growth that is necessary to mitigate the debt distress,” the report said.

“Moreover, the external position is projected to remain under severe pressure in the medium term on account of poor export and import performance on the back of an appreciating US dollar.”

It said the public debt management legislation passed last year would strengthen the legal and institutional framework for debt management. The new legislation gives Treasury an oversight role in the acquisition of new loans by parastatals and local authorities.

The legislation will create a Public Debt Management Office to advise the minister of Finance on all government borrowings and “participate in all negotiations with creditors on government borrowings and guaranteed loans”. It will also assess the risks in issuing any guarantees, including assessing the capacity of the beneficiary of a guarantee to repay the loan, and to prepare reports on the method used for each assessment and the results for approval by the minister.

The report projected annual inflation to end the year at -1,3% rising to -0,7% in 2017.

Inflation has remained in the negative territory since the fourth quarter of 2014, a reflection of the constraining effect of tight liquidity conditions.

In his January monetary policy statement, Reserve Bank of Zimbabwe governor John Mangudya said the central bank was committed to addressing negative inflation by plugging leakages of liquidity from the economy.

More than $1,8 billion was reportedly externalised by individuals and corporates last year.