'Zim risks sliding back into recession'

HARARE - Zimbabwe risks sliding back into recession this year if the country embarks on a “violent” election, as economists and business warn of tough times ahead.

The country registered its first positive gross domestic product (GDP) growth in 2009 following a decade of economic meltdown, but fears of reversing the gains realised since then are mounting.

Zimbabwe’s economy was expected to grow by 7,4 percent this year but Finance minister Tendai Biti slashed the target to five percent expressing concern over the looming election among other challenges.

The International Monetary Fund on the other hand has projected a GDP growth of 6,3 percent in 2013 and a slowdown to 3,6 percent in 2017.

Christopher Mugaga, an independent economist, said Biti’s revised 2013 growth targets would still be difficult to achieve unless there is a dramatic shift in the country’s policies.

“This year is threatening to be more sombre than the previous one as holding elections in Zimbabwe is not just about choosing a leader, but include fighting and violence,” he said.

Mugaga said the 2013 national budget does not provide for the return of the local currency, hence liquidity crisis in the economy will continue.

“The budget statement did not leave room for job creation and we cannot expect the economy to grow when there is high unemployment,” he said, adding that investors will continue to shy away from the country due to the indigenisation policies.

Independent economist and Oxlink Capital chief executive Brains Muchemwa said 2013’s growth rate is expected to remain sluggish at around 4,3 percent due to a host of challenges, chief among them being the lack of capacity to provide adequate funding to business in sectors such as manufacturing, mining and agriculture that would ordinarily provide the sources of steady growth of the economy.

“Equally, the stagnating incomes affect the ability of the economy to grow from within as domestic demand will remain depressed and considering the high marginal propensity to import as evidenced by the high current account deficit, the economy is not expected to create any significant jobs and as such significant growth will remain elusive as with what happened in 2011,” he said.

Muchemwa noted that the unemployment levels were expected to worsen as most corporates in the manufacturing sector are either going to downsize or liquidate.

Kumbirai Katsande, president of Confederation of Zimbabwe Industries (CZI) recently said Zimbabwe risks going back to the hyperinflationary period unless government takes serious steps to reverse the damage to the economy.

“In 2009, the economy had literally grounded to a halt, the introduction of the multi-currency regime in February 2009, gave a dead economy the much needed impetus,” he said.

“Three years down the line, there is growing concern once again that the economy is in dire need of some stimulus of similar magnitude.

The signs are all around us, and to continue for another six to 12 months without some drastic government policy shift on the economy, more companies, especially in manufacturing will collapse.”

“Just how does a country like Zimbabwe allow the importation of bricks, even tomatoes and on the other hand most of our exports are made up of raw minerals.

“We actually celebrate that our supermarkets are full of products and also we promote the mining of our minerals without at the same time doing all we can to get agriculture and manufacturing going,” he said.

“This is not a sustainable economic development model. Mining has no proven capacity for trickle-down effects to reduce poverty, unless we all become panners. The truth is that we must get more serious about agriculture and manufacturing.” - John Kachembere

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