- 2020 has started with an economy reeling from a carryover of 2019 economic meltdown reflected by fuel shortages, foreign currency shortages, depreciating local currency and biting power cuts
- Labour unrest and an unstable political environment reflects 2019 outturns
- The country highly likely to record successive GDP contractions
‘Tomorrow’s progress depends on today’s careful planning.’ Simple as that sounds, the saying has sparked an interest in my view of things to what is unfolding within the political and socio-economic environment in Zimbabwe.
It is my understanding that despite a highly threatening political instability, 2019 started with more positive expectation to the country’s economic outlook compared to the current year. For a country that has suffered two decades of economic instability, a desperate need for change is growing stronger.
In 2019, the country was coming from a contested 2018 general election. Whilst others would easily dismiss the response of the opposition party, MDC Alliance as merely a political gimmick and labelled it as enemy of progress, those paying close attention to detail envisioned a bleak future. The country needed “legitimacy” to kick start the much needed economic recovery.
On the economic front, the fiscal and monetary authorities had introduced the separation of Foreign Currency Accounts (FCA) in October 2018, a move which has since turned out to be the starting point towards the return of the Zimbabwean dollar and the subsequent scrapping of the multi-currency regime.
Respect Gwenzi, the lead analyst at a local financial research firm Equity Axis, admitted in his recently published 2020 Economic Outlook predictions that they did not see government fully de-dollarising. “Our assumptions were that government would gradually move towards liberalisation of the exchange rate given the October 2018 initial move to separate the FCA accounts,” he said.
“We however saw this as a step towards elimination of the Zimdollar other than the USD.”
Whilst January is mostly associated with setting up of new – year resolutions, on a macro-level Zimbabweans had only two weeks into 2019 to start questioning their expectations. A violent protests erupted against a hike in fuel prices which has since had a slowdown effect to progress.
The protest which was met with violent crackdown by the security forces defined a troubled relationship between the government and its subject. Come January 2020, the same stance appears highly threatening as the Labour Unions threaten mass shutdown in a show of displeasure towards the way government is running the economy and addressing the plight of the civil servants.
On the other hand, government is reportedly on high alert against the possible threat of mass demonstrations led by the grieved MDC Alliance party. There were widespread calls during the course of 2019 for talks between the ruling party and the main opposition party, but it was all in vain. Sadly, the country haunted by that political deadlock.
Thus, 2020 is largely becoming a reflection of 2019 outturns. The year started with an economy reeling from a carryover of 2019 economic meltdown exacerbated by fuel shortages, foreign currency shortages, depreciating local currency and biting power cuts.
As such, the odds for the current years’ economic prospects are unsurprisingly bleak and it highly looks like a replay of 2019. The persisting power cuts coupled with fuel and foreign currency shortages will continue chalking productivity and GDP is likely going to contract further or simply improve in the negative.
The country is also facing possibly the worst drought in over forty years and this would further expand government’s expenditure as there is need to export grain to address the ever growing threat of food insecurity.
Meanwhile, inflation which closed 2019 above 400% year on year, is showing no signs of slowing down whilst exchange rates which have become a major determinant in the pricing of goods and services keep shooting northwards.
It is my view that further economic meltdown, which stands to threaten economic growth and socio stability in the current year is something that could have been easily avoided if government and interested stakeholders had engaged in an honest credible dialogue to address the existing economic and socio-political impasse.
Equity Axis News