Zimbabwe’s economy in turmoil

via Zimbabwe’s economy in turmoil – The Zimbabwe Independent 25 July 2014 by Taurai Mangudhla

ZIMBABWE’S economy has underperformed in the first half of the year with the country’s gross domestic product growing by a mere 1,8% in the first six month of the year amid indications the second of 2014 will be worse, according to a local research group.

In its 2014 first half economic analysis for Zimbabwe, Econometer Global Capital (Econometer, said Zimbabwe’s growth for the first half of 2014 averaged 1,8% with the major drivers in abyss.

This comes after Finance Minister Patrick Chinamasa this week said the country could miss its 6,1% growth projections, but will not go as low as 3% as predicted by some institutions on account of growth in agriculture and expected growth in mining in the second half of the year.

Earlier in May MMC Capital said Zimbabwe’s economy was expected to grow by a marginal 1,5% this year, well below government’s 6,1% and World Bank’s 3% growth projections.

Econometer said Zimbabwe’s fiscal space is dwindling with the growing informalisation of the economy coupled with growing deindustrialisation while the banking sector is not as safe and sound as projected by government authorities.

As such, industry capacity utilisation is seen averaging between 27 and 29% by year end with estimates it stood at 33% in the first half of the year, while non performing loans (NPLs) are projected to average 18,5% from the current 16% by end of year.

Econometer argued its own independent survey points to the fact that NPLs are understated as they go as high as 25% for some troubled banks. At the current level of company closures and subsequent retrenchments and job losses, unemployment would have topped 92% by year end with most companies intensifying staff rationalising exercises.

Even government controlled institutions such as the Zimbabwe Broadcasting Corporation is also laying off, evidence the situsation is gloomy going forward.

“An average of two medium sized corporates, five small enterprises and 0,5 large corporates close shop every month in Zimbabwe with smaller towns the most affected by de-industrialisation (and) this calls for the nation to urgently revise policies which directly and significantly impact negatively on the job creation prospects which includes the blanketing indigenisation policy, the revision of title deeds regime and toning down on racially biased language which discriminates Zimbabweans based on colour or creed,” reads part of the report.

Econometer said contrary to the Zimbabwean government’s official position that the banking sector was safe and sound, there are signs of widening cracks which could threaten the survival of two indigenous banks.

“By year end, we expect at most two indigenous banks either to falter or request for curatorship as their liquidity positions worsen whilst attracting deposits is becoming almost impossible,” Econometer said.

“In banking, the level of information asymmetry is so low to the extent that an average potential customer is aware of the risks to do with such banks. RTGS processing is a nightmare with banking institutions feeling the heat much more. Going forward, we do not anticipate any significant recovery of such banks in the next 36 months.”

Econometer said the second half of 2014 was expected to be much tougher due to the dwindling fiscal space with at most US$1,68 billion expected to be collected hence worsening the fiscal deficit within the country. The Zimbabwe Revenue Authority this week reported the revenue performance for the first half of the year were 1% below budget at US$1,72 billion, reflecting the underlying economic environment.

“For a nation of 13 million people to record interim tax collection levels of US$1,72 billion smacks of impending economic crisis which will manifest in infrastructure decay and economic stagnation. The 2015 national budget to be announced around November will just be a fulfilment of statutory requirements as events on the ground prove that it is a budget which will be announced under worst economic conditions since 1980,” reads part of the report.

Compared to the 2008 economic meltdown, 2014 has taken a new twist with all levers of economic growth blocked as policy effectiveness is compromised, Econometer said.

“The year 2008 allowed government to bankroll its printing mania regardless of its inflationary implications, the current state can only steer extreme poverty as the sitting government is clueless on the strategy to raise the GDP levels,” said Econometer.

The institution recommends the country expedites the leadership succession enigma in Zanu PF which is the basic requirement for a successful de-politicisation of government institutions and arresting of the rampant corruption in Zimbabwe.

It also propounds significant restructuring of the current indigenisation and economic empowerment model to allow convergence with both regional and economic treaties.

It also said the economy should promote the production of tradables while restructuring the financial services sector to promote the independence of the central bank as the panacea to the capitalisation of the apex bank, as well as strengthening its supervisory role without any political forces inimical to the growth of the sector.


  • comment-avatar
    Tozvirevakupiko 7 years ago

    No comment from Taurai, I notice its just a summary of the Econometer report. Well I will comment that no surprises here…its going to get worse if not bloody!

  • comment-avatar
    roving ambassador. 7 years ago

    Mugabe sees otherwise. He has his own statisticians. He says the economy is out of the doldrums , he should qualify that with figures. If its a rig we can see through it.

  • comment-avatar
    feared by zanupf 7 years ago

    Econometrics proper is more sophisticated than this academic armchair plagiarism

  • comment-avatar
    nyoni 7 years ago

    Their first priority should be country! Zanus only priority is how do we get rich . Stuff the country. Nyamázans.

  • comment-avatar
    John Thomas 7 years ago

    And these ZANU persons still think they are capable of running the country. It is so sad, the level of stupidity means they cannot even perceive how comprehensively they have failed. No stone has been left unturned in their quest to screw every single thing in the country into destruction. Even now the ZANU’s think that mana will fall from heaven and save them from the consequences of their actions.

    The news I can offer is that there will be no mana. We are all going to have to live with this abject failure and nothing is going to improve until the old man is planted

  • comment-avatar
    just saying 7 years ago

    Come on people expecting ZPF to admit they have failed or stand down is like expecting the Mafia to cease their activities. Thugs & thieves do not care about anyone but themselves & their families. They lie, steal,kill or do whatever is necessary to enrich themselves. When Zimbabweans finally realise that only they can liberate themselves as the likes of SADC and the AU will not life a finger to intervene.