HAVING registered 6,5 percent economic growth in 2022 and 4,5 percent in 2023, Zimbabwe’s improvement has eclipsed many regional economies including sub-regional powerhouse, South Africa, with the country’s growth performance exceeding the average growth rate in Sub-Saharan Africa in 2022, and closely matching it for 2023 (see graphic).
According to the fourth World Bank Zimbabwe Economic Update (ZEU) report launched yesterday, the country has one of the fastest-growing economies in the Southern African Development Community (Sadc), with economic activity accelerating despite global challenges, a confirmation of the positive outcomes of the sound economic reform agenda being spearheaded by the Second Republic.
Since coming into power in 2017, President Mnangagwa’s administration has continued to implement comprehensive “ease of doing business” reforms in the form of fiscal and monetary reform policies, which have been boldly embraced by major stakeholders across the board.
President Mnangagwa
In line with the motto “Zimbabwe is open for business”, the positive domestic and foreign investor sentiment has seen the country boosting its production capacity across the key sectors resulting in improved job retention, new employment opportunities, and a higher percentage of shelf space being occupied by locally-produced goods in shops, in addition to energising exports.
Within the last five years, Zimbabwe has attracted investments running into billions of dollars, mainly in mining value chain deals, tourism, manufacturing, and technology services, among others — buttressing the National Development Strategy (NDS1) ideals while building momentum towards realising an upper middle-income vision by 2030.
While the economy is projected to contract to 3,5 percent in 2024, a decrease from 4,5 percent this year, as agricultural output is expected to suffer from depressed global growth and the predicted erratic and below-average rainfall caused by the El Niño weather pattern, the World Bank report affirms that Zimbabwe’s economy will remain resilient riding on the gains achieved so far.
It noted that the positive growth has been largely driven by continued expansion in agricultural output due to abundant rains and resilience-building, monetary policy tightening, and the easing of Covid-19-related restrictions, which supported economic activity, particularly in the tourism sector.
“Zimbabwe’s economy has seen a strong rebound since the Covid-19 pandemic, making it one of the fastest-growing economies in the Southern African Development Community (2021, 2022, and, so far, in 2023),” said the World Bank.
“In previous years, Zimbabwe faced increased global turmoil, while expansionary monetary policy has put initial pressure on inflation and the exchange rate.
“Yet, since June 2023, the Government proactively tightened monetary policy to bring down inflation and the parallel market premium. It also extended the use of US dollars as legal tender until 2030, further reducing policy uncertainty.”
During the course of the year, the Reserve Bank of Zimbabwe rolled out a number of policy pronouncements, which included the liberalisation of the foreign currency to arrest exchange rate volatility, wanton and unjustifiable price hikes that eroded workers’ buying power.
Reserve Bank of Zimbabwe (RBZ)
The Apex Bank also increased interest rates to 150 percent per annum, a position that was taken to further tame inflation, and later trimmed the same to 130 percent. The Bank further increased the medium-term bank accommodation interest rate from 70 percent to 75 percent per annum.
To curb indiscipline by some market players, the Government also undertook a deliberate investigation into the payment to suppliers and contractors to ministries, departments, and agencies, which exposed a massive overpricing scam by unscrupulous suppliers some of whom pegged their prices on speculative market exchange rate, a move which led to the spiralling of exchange rate and constant price increases.
To put an end to that, the Treasury now demands to get value for money and has said it would not pay for goods and services that are overpriced. More pronouncements have been made in the proposed 2024 National Budget Statement, with a focus on scaling up domestic revenue mobilisation to support key national projects while increasing spending on social safety services.
While Zimbabwe’s economic outlook appears moderate, the World Bank has said the subdued dynamics reflect the continued global headwinds, structural bottlenecks, weather-related shocks and price and exchange rate volatility threats.
It noted that the prolonged global turmoil could result in a slowdown in global output, reduced trade and investment, increased volatility in commodity prices and supply disruptions.
Moreover, the global financial institution said fiscal pressures may result in an expansionary economic policy, which could increase economic volatility, thereby, impacting private sector activity and growth.
It warned that the prevailing climate change shocks may also lower economic output, particularly in the agriculture sector hence continued economic reforms will be essential to mitigate these risks, including fiscal adjustment and rebuilding foreign exchange reserves.
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