Economy expected to rebound after contraction

  • 2021 GDP growth expected to grow by 7.4% from -4.5% in 2020
  • This rebound would be supported by consumption and investment improvements
  • Independent estimates including Equity Axis forecast a GDP loss of between -10% and -15% for 2020

Harare – Zimbabwe’s economy is expected to accelerate to 7.4% in 2021, from a contraction of 4.5% in 2020, Finance and Economic Development Minister Professor Mthuli Ncube said in the 2021 Pre-Budget Strategy Paper released last week.

The report underscored that this rebound would be supported by consumption and investment improvements, which are expected to grow by 2.6% and 5.8% respectively.

“The recovery in consumption is mainly anchored on expected stabilisation of inflation through ongoing policy interventions which should aid restoration of purchasing power of consumers,” Professor Ncube said.

He added that public investment is also expected to contribute 5.1% to GDP growth as Government pushes on some of the projects that stalled during the year.

According to the strategy paper, all sectors of the economy are expected to register positive growth in 2021, with the agriculture and mining sectors expected to record the highest growth rates of about 11% each.

Tourism sector is expected to grow by 6.8% while electricity is anticipated to register a 10% growth, among the major sectors.

Meanwhile, inflation is projected to slow down significantly, with average annual inflation projected at 134% during the year 2020.

“The slowdown in inflation will be attributed to deepening of the foreign currency auction market which is expected to sustain exchange rate stability.

“Reserve Bank is also expected to continue to curtail growth in money supply which is one of the major drivers of inflation,” Professor Ncube said.

Furthermore, the anticipated better agriculture season should result in reduced demand for foreign currency, further supporting exchange rate stability.

Over the past three years, the economy has been going through a rough patch exacerbated by inflation and exchange rate depreciation, lack of international financial support, cyclone Idai, impact of drought and the ongoing COVID-19 pandemic.

The 2021 prospects according to Professor Ncube are based on recovery from COVID-19, good agricultural season, sustainability of the auction system, tourism and trade resumption, firming international mineral prices among others.

However, despite government’s positive economic outlook, independent estimates including Equity Axis forecast a GDP loss of between -10% and -15% for 2020.

In its review of the Pre-Budget Strategy Paper, Equity Axis highlighted that the actual and predicted 2019 and 2020 economic performances show a clear and wide variance to TSP set targets. In the TSP, government set a 2019 and 2020 target of 9% and 9.7% respectively (Pg 10).

“Clearly government predictions always attempt to paint a brighter outlook, only to be perennially missed. Both past and future performances has been overstated, while losses in GDP understated,” the research firm said.

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