daniel chigunwe
Business Writer
Zimbabwe will record the lowest economic growth rate among southern African countries in 2023, according to the latest World Economic Outlook report by the International Monetary Fund.
At a 2,5 percent GDP growth rate in 2023, Zimbabwe is only above South Africa at 0.1 percent and Malawi at 2,4 percent.
The country’s growth rate is below neighbouring countries with Zambia expected to register a 4 percent GDP growth.
Mozambique at 5 percent and Botswana 3,7 percent are expecting better economic fortunes than Zimbabwe.
Sub-Saharan Africa’s region as a whole is expected to register an economic growth rate of 3,6 percent in the period under review.
This comes as the IMF is expecting global economic growth to remain weak for longer.
The global lender said that five years from now, global growth is expected to be around 3 percent — the lowest medium-term forecast in an IMF World Economic Outlook report in 30 years.
“The world economy is not currently expected to return over the medium term to the rates of growth that prevailed before the pandemic,” the fund said in its latest economic outlook.
The weaker growth prospects stem from the progress economies like China and South Korea have made in increasing their living standards, the IMF said, as well as slower global labour force growth and geopolitical fragmentation, such as Brexit and the Russia,Ukraine conflict.
In the short term, however, the IMF expects global growth of 2.8 percent this year and 3 percent in 2024, slightly below the fund’s estimates published in January. The new estimates are a cut of 0.1 percentage point for both this year and next.
“The anemic outlook reflects the tight policy stances needed to bring down inflation, the fallout from the recent deterioration in financial conditions, the ongoing war in Ukraine, and growing geoeconomic fragmentation,” the IMF said in the same report.
The latest Zimbabwe GDP projection by the IMF is lower than its previous projection of 2,8 percent and also below Finance and Economic Development Minister Mthuli Ncube’s projection of 3,8 percent.
Minister Mthuli expects growth to be sustained mainly by mining, construction and agriculture, as well as accommodation sectors, sectors which seem to be doing well and probably not warranting a downward review on GDP growth.
However, growth is also supposed to be underpinned by, among others, stable power supply; tight monetary and fiscal policies; and continued use of the multi-currency.
Power supply has, however, been unstable as the country is experiencing power cuts lasting as long as 18 hours.
While authorities speak of tight monetary and fiscal policies, they have done little to stabilise massive currency depreciation so far in the year.
The local currency has depreciated significantly on both the official and parallel markets.
On the widely used parallel market, the exchange rate started the year at $1,000 to US$1 but is now trading at anything above $1,600 to the greenback.
The multi-currency system is now mirroring a mono-currency with more transactions being conducted in US dollars.
According to data released by ZimStat in February, the level of US dollar use in the economy averaged 76,56 percent.
This is likely to have been further entrenched in March going into April 2023.
Market players say the trend is leading to a slowdown in economic activity as aggregate demand wanes.
In other metrics, the IMF expects Zimbabwe’s inflation to slow down to 181.8 percent in 2023, the highest in Africa.
Zimbabwe has, however, changed how it reports its official inflation figures after it chose a blended inflation figure as opposed to ZWL inflation figures.
In his 2023 Monetary Policy Statement in February, RBZ governor Dr John Mangudya, said it was logical that the blended rate of inflation should be the reference rate of inflation in Zimbabwe.
“The Zimbabwe dollar inflation is no longer a true representative of the cost of living in Zimbabwe as the country is in a dual currency system where prices and household incomes are also in both US dollar and local currency.”
Economist, Victor Bhoroma, said it would be difficult to forecast economic growth in the country because of limited access to data.
He, however, said growth is likely to be lower than last year because the amount of rainfall received this year was slightly lower.
“At the same time, when you look at the impact of inflation, the impact of powercuts on productivity and the continued impact of imported inflation from the Russia, Ukraine conflict, you realised there has been headwinds for the local economy.
He said a figure of between two to three percent would definitely make sense “though there is a problem of data and probably the exchange rate they are using in order to compute the figures that they (IMF) has got”.
Another economic analyst, Walter Mandeya of Trigrams Investments, said given the persistent energy and currency challenges, which are compounding with 2023 being an election year, the economic growth prospects are indeed challenging despite all the green shoots that are evident across the country.
“We believe that 2023 will be recorded as a year of fiscal consolidation in which both the public and private sectors needed to restrategise to face a future with significant global headwinds initially triggered by the strains in the America, China trade and diplomatic relations, the post Covid-19 pandemic trade disruptions, which became further complicated by the conflict in Ukraine,” Mandeya said.
Bongani Ndlovu