adminenjoyed phenomenal economic growth since dollarisation in February 2009, but a combination of the eurozone crisis and a myriad of domestic economic and political issues could reduce the boom.
The eurozone crisis has seen countries such as Greece, Ireland, Italy and France having their credit ratings downgraded and there are strong fears this would have ripple effects on common currency for Europe and the world.
There is strong sentiment among economists that while Zimbabwe has huge potential to sustain growth, the tiny US$10 billion economy had little influence over some external forces from the US$70 trillion global economy.
The fears stem from the fact that over 93 percent of the country’s exports are commodities and the impact of a global slowdown on commodity demand and prices poses the biggest threat to the growth of the last three years.
And the eurozone presents yet the biggest threat to Finance Minister Tendai Biti’s 9,4 percent projected economic growth, which builds on a 4,5 percent growth in 2009, 8,1 percent in 2010 and 9,3 percent last year.
Economists contend that due to low agriculture plantings, uncertain global economy and domestic political tensions the most growth the country was likely to register this year would be 5 percent.
Also, history has it that after dollarisation most economies either continue on a growth path or slowdown markedly a few years down the line.
Professor Tony Hawkins of the University of Zimbabwe predicted the global economic slowdown, weaker commodity prices, tighter credit markets, sharper oil prices and a slowdown in the SA economy will spike the local economy.
The global economic crisis has reduced demand on Zimbabwe’s mainly commodity exports while external financial institutions will direct even less capital to Zimbabwe, already limited by scepticism due to election prospects.
“Slowdown in South Africa will intensify regional and import competition especially if the rand (down 18 percent last year) stays weak while the US dollar remains around the current levels,” said Professor Hawkins.
Domestically, he said, agriculture plantings were likely to weigh down growth with maize plantings down 35 percent, cotton and soyabean down 60 percent while tobacco planting has declined 10 percent.
Output from the mining sector, which Minister Biti projected to grow by 34 percent this year is seen recording lower output due to challenges around electricity, higher royalties, weaker prices and rising costs of operations.
The fact that banks are fully loaned up, cost of credit increasing, credit lines constrained by a combination of eurozone and domestic political uncertainty are seen affecting economic rebound from a domestic front.
In light of these factors economists predicted that Gross Domestic Product will only expand by 4,5 percent (Budget 7 percent), inflation will peak at 9,5 percent (Budget 5 percent) while exports are seen increasing by 10 percent.
Economists said while it was conceivable booming commodity prices, diamond exploitation, recovery in tobacco and dollarisation could sustain growth momentum but this was practically impossible due to a number of factors.
Such factors that could affect growth include rationalisation of the land reform programme, indigenisation drive, the country’s US$7 billion debt overhang, liquidity constraints, lack of public sector reform and policy inconsistency.
“The expectation that without convincing answers to these and other especially policy questions there will be sufficient investment to sustain 8 percent growth is a pie in the sky. It’s not going to happen,” said a Harare economist.
Online Reporter