Economy to grow by 5.5 percent by year-end

Judith Phiri ,Business Reporter

ZIMBABWE’s economy is projected to grow by 5.5 percent by the end of this year, a slight improvement from the August projection of 5.3 percent buoyed by the better-than-expected output in agriculture, in particular, tobacco, wheat and cotton.

This was said by the Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube while presenting the 2024 National Budget at the New Parliament Building in Mt Hampden on Thursday.

He however, said economic growth is expected to slow down to 3.5 percent in 2024, owing to the anticipated impact of the El-Nino phenomenon being forecasted for the 2023/24 summer cropping season on agricultural output, as well as declining mineral commodity prices attributable to the global economic slowdown.

“The 2024 GDP projections are underpinned by the following broad assumptions, normal to below normal rainfall season due to the El-Nino effect, slowdown in global economic growth amid geo-political tensions, declining international commodity prices, continued use of the multicurrency regime and tight fiscal and monetary policies,” said the Minister.

He said merchandise exports stood at US$5.2 billion during the first nine months of the year and were projected to increase by 4.3 percent to US$7.3 billion by year end from US$7 billion in 2022, on account of higher tobacco, lithium, and diamond exports.

He said merchandise imports registered a 4.7 percent increase, from US$6 billion in the first nine months of 2022 to US$6.3 billion in 2023, driven by growth in fuel, machinery, and electricity imports.

“To year end, merchandise imports are projected at US$8.5 billion, 4.9 percent up from US$8.1 billion in 2022. Imports are projected to further increase to US$9 billion in 2024 on account of higher imports of grain, energy, raw materials and machinery imports,” he added.

“Remittances are projected to continue driving the current account surplus and are projected to close the year 2023 at US$2.1 billion, before rising further to US$2.2 billion in 2024.”

The Minister said the current account is expected to close the year 2023 in a surplus position of US$244.4 million, slightly lower compared to US$305 million registered in 2022, while in 2024, the current account surplus is projected to narrow to US$204.5 million, reflecting a wider trade deficit as imports accelerate at a faster pace than exports.

Prof Ncube said domestic prices have relatively been stable since the third quarter of the year, as reflected by month-on-month inflation which declined from 12.1 percent in June 2023, to 4.5 percent in November 2023.

“Concomitantly, the annual headline inflation declined from 30.9% in June 2023 to 21.6 percent in November 2023. In the outlook, annual inflation is expected to remain relatively stable and is projected to end the year 2023 slightly below 20 percent. In 2024, annual inflation is anticipated to end the year between 10 percent to 20 percent, reflecting continued tight monetary and fiscal policies.”

On the exchange rate, he said the introduction of the wholesale foreign exchange auction on the back of the recent liberalisation of the exchange rate, saw the parallel market premium declining from a peak of over 140 percent in May 2023 to around 20 percent in October 2023.

Meanwhile, on the 2024 macro-economic fiscal framework, the Minister said in line with the projected economic growth of 3.5 percent, total revenue collections in 2024 are estimated at Z$53.9 trillion, (18.3 percent of GDP), broken down as Z$51.2 trillion tax revenue and Z$2.7 trillion non tax revenue.

While, guided by the expected revenue envelope and the desired fiscal path, expenditures in 2024 are projected at Z$58.2 trillion (19.8 percent of GDP).

Prof Ncube said: “The total budget financing gap amounts to Z$9.2 trillion, comprising of budget deficit of Z$4.3 trillion (1.5 percernt of GDP) and amortisation of loans and maturing Government securities estimated at Z$4.9 trillion. The deficit will be financed through domestic and external borrowing.”