'2014 economic growth a tall order'

HARARE - Listed ZB Financial Holdings Limited (ZBFH) says government’s projected 6,1 percent economic growth target is a tall order as the recently announced 2014 budget does not comprehensively address challenges facing the country.

About a fortnight ago, Finance minister Patrick Chinamasa presented a belated $4,1 billion budget under which he predicted Zimbabwe’s “investment-starved” economy would  grow by almost double this year from the 3,4 percent in 2013.

The Treasury chief’s predictions come amid hurdles which include an acute liquidity crisis, low savings, depressed investment, a huge external debt overhang, subdued industry productivity, infrastructure deficits and general financial sector vulnerabilities, among other constraints.

Chinamasa also projected real gross domestic product (GDP) growth of 6,4 percent in 2015 —  translating to a nominal GDP of around $14,1 billion — up by almost seven percent from the 2013 nominal GDP of about $13,1 billion.

ZBFH said “however, the (budget) statement does not comprehensively seek to address most of the challenges,” adding that “it is… difficult to see how the economy can grow to the envisaged level of 6,1 percent in 2014 from a low base, particularly given the severe funding constraints, which the real sectors of the economy are facing.”

“While we believe that growth will still be possible in 2014, we do not foresee that growth surpassing what was achieved in 2013 (3,4 percent),” the Zimbabwe Stock Exchange-quoted financial group said.

It further stated that the agriculture sector — expected to be the key driver of the country’s slackening economy along with mining ? “is at the mercy of good rains, and outside of tobacco, growth in other crops will likely be stunted.”

“Mining remains the key growth driver, but is also subject to adverse price fluctuations on international commodities markets, which in the short to medium term are not favourable.

The group said “in terms of inflation, while the country can still achieve single digit inflation in 2014 as envisaged in the budget, the increase in import duties on some finished products and a number of other protective measures designed to support the local industry may ultimately work against lowering domestic inflationary pressures.”

It said that while Chinamasa’s emphasis on government’s stance to maintain the 51/49 percent ndigenisation threshold would help in terms of “policy clarification”, it is unlikely to ease the fears or discomforts amongst the international investors over the implementation of the empowerment policy in the short to the medium term.

On the other hand, ZBFH said Chinamasa’s reaffirmation of the use of the multi-currency regime “will give investors and the public a greater sense of confidence and certainty in the conduct of their transactions.”

Zimbabwe abandoned its currency in 2009 after it had been ravaged by hyperinflation which topped 231 million percent and adopted the multi-currency system — dominated by the United States dollar.

While presenting his 2014 budget, Chinamasa reiterated that there will be no immediate re-introduction of the Zimbabwe dollar.

This was on the back of escalating fears and debate over the return of the local currency as the country suffers an acute liquidity crisis.

“Contrary to what is peddled in the newspapers, government has continued to reassure the market that the multi-currency system is here to stay,” he said.

“This position, I must emphasise, is anchored on the Zim Asset economic blue-print,” Chinamasa said, adding that “as a matter of fact, depending on size or volume of trade flows, I would be persuaded to introduce other foreign currencies to the cocktail of multi-currency regime currencies, if conditions warrant.”

Monetary authorities, the Reserve Bank of Zimbabwe (RBZ), have also maintained that the discredited and worthless currency will not be re-introduced anytime soon.

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