Source: Zimbabwe falling behind as WB forecasts negative F16 growth | The Financial Gazette October 11, 2016
POLITICAL uncertainties would continue to exert a drag on economic growth in Burundi, the Comoros and Zimbabwe, three of the six countries grouped by the World Bank as “Falling Behind” on the African continent.
By nature, economic reforms are linked to the politics of the day.
According to the latest World’s Bank Africa Pulse report Zimbabwe is among the countries which displayed the weakest growth trajectory throughout 1995–2008 and 2014–16, that is, Gross Domestic Product growth failed to surpass the bottom tercile in both periods.
The “Falling Behind” group is comprised mostly of fragile states, as well as small (mainland and island) countries, namely, Burundi, the Comoros, Guinea, Lesotho, Swaziland, and Zimbabwe. The six countries in the “Falling Behind” group house 4,4 percent of the region’s total population and produce only about two percent of its total GDP.
According to the average annual GDP growth rate of the falling behind growth performers was 0,9 percent in 1995–2008 and 1,8 percent in 2014–16. Among the falling behind countries, Swaziland and Guinea are the countries with the largest growth contractions (1,6 and 1,4 percentage points, respectively), and the former displays the lowest growth rate in 2014-16 (about 1,2 percent per year).
The report notes that Zimbabwe’s fiscal deficit has deteriorated as remedial actions have been limited and this has resulted in the country registering a negative correlation between the cyclical components of government consumption and GDP in both periods (1995-2009 and 2014-16).
According to the International Monetary Fund, Zimbabwe will post a negative economic growth rate of 0,3 percent in 2016 weighed down mainly by the effects of the El-Nino induced drought and low commodity prices. The expected negative figures further buttresses a declining trend which started in 2013 and the Fund expects the situation to deteriorate further in 2017 with an expected contraction of 2,5 percent, but growth is expected to rebound in 2018 to 1,6 percent. The country’s balance of current account as a percentage of GDP is projected to close 2016 at -7,5 and would reduce marginally in 2017 to -6,1.
Overally, the outlook for the region’s low-income countries includes a modest pickup in growth in oil and mineral exporters as they continue to adjust to low commodity prices. Growth will remain weak among oil exporters over the next two years. Declining production due to maturing oil fields will compound low oil prices in Chad, while conflict will reduce consumption and investment in South Sudan.
Many other non-oil exporters will continue to struggle, with activity expanding at a moderate pace. In Mozambique, after slowing in 2016 on the back of declining investment and weak commodity prices, activity is expected to rebound gradually in 2017 as recent progress in developing the nascent energy sector helps boost investment in the country’s huge gas sector.
Growth will remain below trend in the Democratic Republic of Congo, as weak investment due to political tensions compounds the effects of low copper prices, and as inflation driven by a weakening exchange rate weighs on private sector demand.
A slow post-Ebola recovery is foreseen in Guinea, Liberia, and Sierra Leone, as low commodity prices weigh on growth, pushing back investment plans and reducing exports. For most other low-income countries, including Rwanda, Senegal, and Tanzania, growth is expected to remain robust, supported by public investment. In Ethiopia, the government’s commitment to the second phase of its Growth and Transformation Plan will see continued state infrastructure buoy growth despite adverse weather conditions. FinX
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