• Finance and Economic ministry initially predicted 3% growth
• Negative growth on the back of COVID 19 and Drought
• 4.2% recovery expected next year
The International Monetary Fund (IMF) has maintained an adverse economic outturn for Zimbabwe in 2020. In its latest research paper titled World Economic Outlook the IFI said the country’s GDP likely to fall by as much as 10.4%, a forecast it had earlier made before the coming of COVID-19.
Government which had earlier forecasted a 3% economic growth for 2020, later changed the forecast to an adverse -4% mid-way into the year. The revision of government’s forecasts was premised on the occurrence of COVID-19, drought and economic reforms, which disrupted production.
In 2019 Zimbabwe’s economy went into a recession as economic growth turned negative by a wide margin of -10%. Government’s conservative estimates says the decline was just -6%, this is despite an initial 6% growth forecast for that respective year and a succeeding 10-year ambitious average growth of 8% per annum.
The 2019 GDP loss came after years of consistent growth during the dollarization period. Under a 10 year dollarization period stretching between 2009 and 2019, Zimbabwe’s economy grew at an average of 5% per annum. A more stable economic environment allowed for increased production and and attracted investment into the country.
We are projecting a somewhat less severe though
still deep recession in 2020, relative to our June forecast. The revision is driven by second quarter GDP outturns in large advanced economies, which were not as negative as we had projected; China’s return to growth, which was stronger than expected; and signs of a more rapid recovery in the third quarter.
Outturns would have been much weaker if it weren’tGovernment was also banking on the strengthening of the Zimbabwean dollar and exchange stabilisation but however since the beginning of the year until July the Zim dollar was on a freefall, propelling inflation up to as high as 837.53% in July 2020 (Year-on-Year).
The Zimbabwean dollar has only started strengthening recently thanks to the central bank’s foreign currency auction system which has also led to a decline in inflation rates with the Year-on-Year figure for September coming in at 659.40% after shedding 101.62 percentage points from August’s 761.02%.
As at 13 October 2020 the official rate was USD1:ZWL$81.3.
The ministry of finance has a target of slashing inflation to 300% by the end of the year which would encourage consumer spending and consequently increase production across all sectors and drive economic growth, the IMF however projects that Zimbabwe will close the year with its inflation at 496%.
Economic growth, like in any other country was also meant to be driven by Industrial Capacity Utilization which is at a very low level in Zimbabwe.
In 2019, according to the Confederation of Zimbabwe Industries (CZI), Industrial Capacity Utilization closed the year at 36,4% and they predict that by the end of this year due to exogenous factors like COVID 19 it will be much lower and therefore driving economic development south.
Zimbabwe is however not alone in negative growth as the IMF anticipates that the overall world GDP will fall by 4.4% before growing by 5.2% in 2021 while Zimbabwe will recover by 4.2% next year.
Equity Axis News.