“Zim economy to defy present headwinds” AfDB

HARARE-Multilateral development lender, AfDB said it sees Zimbabwe growing at a faster rate of 4.2% in 2019 despite the shortages in forex and some other constraints.

In its Africa Economic Outlook paper released on Thursday in Cote d’Ivoire, the Bank said Zimbabwe’s economy is likely to grow by 4.2% in 2019 before accelerating to 4.4% in 2020. It estimates that the economy grew by 3.5% in 2018.

All the projected estimates are ahead of both government and some other reputable institutions’ own projections.

Zimbabwe sees its economy growing by 3% in 2019 coming off an estimated growth rate of 4% in 2018. Initially the economy was projected to grow by 9% before a downwards revision to the current 3%.

Government is concerned with the spiking inflation rate whose deflationary impact on income is adverse and grossly discounts the net outcome. As at December, year on year inflation rate was seen at 42% coming from 31% in November.

In November the Minister of Finance said he sees inflation coming off by year end but fundamentals have chosen a varying path in defiance of the professor’s desired outcome.

In its issue, the AfDB noted that high and unsustainable debt to GDP ratio, the high fiscal deficit, cash shortages, 3 tier pricing model and limited availability of forex which continue to constrict economic activity and the persistent shortages of essential goods, remain the major headwinds for any meaningful economic recovery.

The Bank says it however sees growth beyond these headwinds and this growth will emanate from the key sectors of mining and agriculture backed by public and private investment.

The government has earmarked to spend $2.5 billion on infrastructure development in 2019 while several bonds designed to mop up excess liquidity in the economy will be floated over the year, a factor driving private investment.

Although the Zimbabwe economy has an undisputed potential, headwinds, reminisce of the pre-dollarization era, threaten to undo the growth potential.

Presently inflation pose the greatest risk to growth, while the move to move away completely from a dollarized economy to a local currency is also likely to shake the economy, as it negotiates its way.

Following the fuel price increases, it is expected that companies will retaliate through further price adjustment, although the extend of response will depend on the viability of a rebate method, introduced as safe haven for a select key sectors such as mining, agric and manufacturing.

– Equity Axis News

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