Forex issues to affect medium-term GDP growth: BAZ

Enacy Mapakame
HARARE – The Bankers Association of Zimbabwe contends economic performance for the next five years will remain limited by some “binding constraints” mainly driven by foreign exchange challenges.

One of the key factors to affect economic performance is that Zimbabwe is a dollarized economy. Already, there are signs the United States economy is firming driven by a strong productivity growth.

“This has been making imports cheaper and exports more expensive, thereby undermining competitiveness for our economy that entered in 2009 at very high base cost and price levels that reflected many years of chronic inflation ending in hyperinflation,” said BAZ advocacy executive Clive Mphambela in a presentation at the recently held Confederation of Zimbabwe Industries (CZI) 2018 economic outlook symposium.

“In the short to medium-term – the next 5 years – economic performance will be severely restricted by a number of severe “binding constraints,” he said.

Mphambela added availability of foreign currency would be one of the biggest challenges the economy will face in the short to medium term followed by energy, water and transport.

Foreign currency shortages will have a knock on effect on most sectors of the economy, eroding its competitiveness, while inflationary pressure cannot be overlooked.

The banking sector for instance, has already been marred by increased demand for cash, declining correspondent relationships, low nostro balances and a declining appetite to lend in an economy suffering a confidence crisis.

Mphambela however suggested the economy remain dollarized as one of the options to limit the challenges and gradually improve competitiveness while pursuing internal devaluation.