Zim still a retail economy

having imported US$6,2 billion worth of goods against US$3,2 billion exports.
According to the African Development Bank’s monthly economic report, Zimbabwe recorded a US$3,1 billion trade deficit in the first nine months, as industry is yet to recover.

However, on a monthly basis the trade balance declined from US$872 million in August 2011 to US$508 million last month.
“The trade balance structure remains a potential challenge to the management of the current account,” said AfDB.
“The high growth rate of imports, against a sluggish growth of exports is not favourable for the recovery process of the economy.”

Zimbabwe is still recovering from a decade of economic instability characterised by hyperinflation, low industrial and production, company closures, shortage of electricity and widespread shortage of basic commodities.

But the formation of an inclusive Government in late 2008, the introduction of the multi-currency system in February 2009 and the adoption of short-term economic recovery policies brought stability, as the recovery started.

While inflation has fallen to record lows and production significantly increased the economy still faces huge challenges regarding funding to retool and fund working capital requirements to raise industrial output.
According to Industry and Commerce Minister Welshman Ncube, local industry requires an estimated US$2 billion to recapitalise, replace old equipment and adopt state-of-the-art technologies to enhance production efficiency.

This has seen the country relying on imports largely from South Africa and Botswana, but also from the United States and China, which are better priced than to locally made products as they are more expensive to produce.

Negative trade balance means a country is importing more than it is exporting and exposes its economy to any economic cycle problems that may occur in countries from which the country imports goods.
An influx of commodities imported from other countries also presents immense competition for local producers and denies local industry adequate latitude to rebuild and improve standards to world class levels.

A positive Trade Balance (surplus) indicates that exports are greater than imports.
When imports exceed exports, the country experiences a trade deficit. Because foreign goods are usually purchased using foreign currency, trade deficits usually reflect currency leaking out of the country at a rate faster than it is flowing in.

Such currency outflows may lead to a natural depreciation unless countered by comparable capital inflows (inflows in the form of investments, Foreign Direct Investment – where foreigners investing in local equity, bond or real estates markets).

At a bare minimum, deficits fundamentally weigh down the value of the currency.
Finance Minister Tendai Biti projected, in his 2011 National Budget Statement, Zimbabwe’s economy would this year grow by an average of 9,3 percent.