Economy to grow 4pc: Zim-Asset gets thumbs up

Mernat Mafirakurewa Business Editor
THE African Development Bank projects Zimbabwe’s economy to grow by four percent this year and has lauded the adoption of the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim-Asset), which it says has a number of positive elements.The projections are contained in the latest African Economic Outlook (AEO) 2014 which sees the economy’s growth slowing to 3,7 percent in 2015. The continent’s growth is projected to accelerate to 4,8 percent in 2014 and 5 to 6 percent in 2015.

Last year the government projected the economy to grow by 6,1 percent.

The AEO analyses the continent’s growing role in the world economy and predicts two-year macroeconomic prospects.

It details the performance of African economies in crucial areas: growth, financing, trade policies and regional integration, human development and governance.

“Real Gross Domestic Product growth is projected to marginally improve to 4,0 percent in 2014.  Inflation developments will continue to be influenced by the USD/ZAR exchange rate, international oil prices and local utility charges. Persistent liquidity shortages combined with low effective demand and a weak South African rand will dampen inflationary pressures in the economy.

“Zimbabwe is experiencing a structural regression, with the acceleration of deindustrialisation and informalisation of the economy”.

The country’s year-on-year inflation for March dropped to -0,91 percent from -0,49 percent in February.

AfDB said the poor performance of domestic revenue inflows and the rise in recurrent expenditures would continue to constrain fiscal space, while the continued use of the multi-currency regime would result in monetary policy largely remaining unchanged.

“In 2013, the government unveiled the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim-Asset, 2013-18). Zim-Asset has a number of positive elements, such as the adoption of results-based management and a clear implementation matrix.

“The policy blueprint also correctly identifies a number of key binding constraints to development, but it does not clearly articulate the country’s institutional and financial capacities to deal with those constraints simultaneously within the five-year period,” the AfDB said.

Zim-Asset was crafted with a view to achieve sustainable development and social equity anchored on indigenisation, empowerment and employment creation, which will be largely propelled by the judicious exploitation of the country’s abundant human and natural resources.

The Results Based Agenda is built around four strategic clusters — Food Security and Nutrition; Social Services and Poverty Eradication; Infrastructure and Utilities; and Value Addition and Beneficiation.

AfDB, however, said Zimbabwe’s economy remained in a fragile state, with an unsustainably high external debt and massive deindustrialisation and informalisation.

The average GDP growth rate of 7,5 percent during the economic rebound of 2009-12 is moderating.

It said the economic slowdown was due to liquidity challenges, outdated technologies, structural bottlenecks that include power shortages and infrastructure deficits, corruption and a volatile and fragile global financial environment.

AfDB said economic growth in Southern Africa would, however, be uneven.

Angola, Mozambique and Zambia which recorded the highest growth of between 5 percent and 7 percent in 2013 are projected further to accelerate to between 7 percent and 9 percent in 2014/15.

Growth in these countries is boosted by investment in infrastructure and in extractive industries.

Malawi’s economy is projected to grow by 6,1 and 6,2 percent in 2014 and 2015 respectively.

Economic growth in Mozambique is expected to reach 8,5 and 8,2 percent over the same period.

Growth in neighbouring South Africa will be slow at 2,7 and 3 percent this year and next year respectively dragged down by labour unrest and the weak global environment.

In 2013, Africa maintained an average growth rate of about 4 percent. This compares to 3 percent for the global economy and underscores again the continent’s resilience to global and regional headwinds.

Major challenges for African countries were identified as preserving political and social stability.

“In order to sustain the economic growth and ensure that it creates opportunities for all, African countries should continue to rebuild shock absorbers and exercise prudent macro management. Any slackening on macro management will undermine future economic growth,” said Mthuli Ncube, chief economist and vice-president of the African Development Bank.

“In the medium-to long-term, the opportunity for participating in global value chains should be viewed as part of the strategy for achieving strong, sustained and inclusive growth ,” he added.

The AEO shows that there has been remarkable progress in human development, with lower poverty levels, rising incomes and improving rates of school enrolment and health coverage.