Biti slashes economic growth target

HARARE - Finance minister Tendai Biti has revised downwards Zimbabwe’s 2013 economic growth target to 3,4 percent from five percent.

The Treasury chief said developments in the first half of the year “indicate evidence of stagnation, particularly through under-performance in the key sectors of agriculture and mining.”

This comes as last year Biti revised downwards the economic growth targets twice from an initial projection of 9,6 percent to 5,6 percent and then to 4,3 percent.

The 2012 revision was in line with the International Monetary Fund (IMF) projections, which said the country’s economy would grow by only four percent as a result of depressed revenue inflows.

IMF said despite Zimbabwe realising growth in its productive sectors such as mining and agriculture, its economy — still suffering a hangover from a decade-long recession — continues to experience funding challenges that have resulted in government failing to sustain critical economic requirements.

Biti said the projected economic growth decline was also reflected by slowdown in growth of aggregate demand, which is now projected to grow by seven percent in 2013, down from the original forecast of 12 percent.

“The seven percent growth in aggregate demand will be supported by rising final consumption, notwithstanding marginal growth in disposable income due to the liquidity crunch,” he said.

He highlighted that while domestic investment was primarily limited by the liquidity challenges prevailing in the economy, foreign direct investment was mainly constrained by perceived risks associated with the elections as well as the Indigenisation Act.

“Resultantly, private investment is projected at 6,3 percent of GDP in 2013. On the other hand, public investment’s original target of 4,4 percent remains low and unachievable due to over-crowding from unsustainably high recurrent expenditures of 32,6 percent of GDP,” said Biti.

He said the under performance of key productive sectors during the half year had also contributed to the slashing of the gross domestic product (GDP) growth target.

“Mining sector’s growth has been revised downwards from 17,1 percent to 5,3 percent while the agriculture sector is now expected to grow by 5,4 percent from the initial 6,4 percent,” he said while presenting his mid-term budget last Thursday, adding that the downward revision in agriculture growth was due to a poor 2012/2013 rainy season.

Maize yield for 2013 was targeted at 798 600 tonnes, down from 968 000 tonnes last year with Zimbabwe requiring approximately two million tons of the cereal annually.

Wheat was also projected at 33 000 tonnes in 2013, one percent lower than 33 700 tonnes recorded last year.

On mining, gold production — a key export mineral for Zimbabwe — was projected at 15 000 kg, down from the initial 17 000 kg due to operational challenges at major mines and declining international gold prices.
Biti also revised downwards diamond production for the year to 12,5 million carats from 16,5 million carats in 2012.

“Diamond production slipped 11,4 percent to 2,8 million carats during the first quarter of 2013 compared to 3,1 million carats produced during the same period last year.

The decline was attributed to diamond producers shifting from alluvial mining to conglomerates which are relatively costly to produce,” he said.

According to the mid-term statement, the current account deficit remains a challenge with exports shipments revised downwards from $5,2 billion to $4,5 billion while the import bill has been slightly revised downwards from $8 billion to $7,6 billion.

On the financial services sector, the deposits increased by 5.3 percent from $4,2 billion in January 2013 to $4,4 billion as at 31 May 2013.

While the economy exhibited signs of economic slow-down, revenue collections were above target with a positive variance of 0,8 percent.

The inflation rate has remained low with the 2013 target further revised downwards to 3,9 percent from the initial 5 percent.

On the other hand, the Zimbabwe Stock Exchange remains attractive reaching a market capitalisation of $5 billion during the first six months of the year.

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