Zim's economic forecast downgraded further

HARARE - International economic think-tank, Business Monitor International (BMI), has become the latest institution to cut Zimbabwe’s economic growth outlook for this year, amid acute power supply constraints, massive company closures and a weak domestic demand.

BMI slashed Zimbabwe’s economic growth forecast for this year to 1,7 percent in its latest Business Forecast Report, from 3,1 percent.

The research company also revised the outlook for next year to 2,2 percent from its initial projection of 3,3 percent.

“Only a real contraction in imports, on the back of weak domestic demand, has prevented us from revising the headline forecast into negative territory,” said BMI.

This marked the third consecutive growth downgrade in less than a year, reflecting the effect of low aggregate demand, power cuts, liquidity constraints and high unemployment rate.

Finance minister Patrick Chinamasa recently cut his economic growth forecast for this year to 3,1 percent from 6,1 percent previously, while the International Monetary Fund (IMF) and World Bank recently lowered forecast to 3,1 percent and 2,0 percent, respectively from 4,0 percent.

The downgrades to growth projections come amid calls from various quarters for Zimbabwe to urgently implement structural changes.

These include reducing red tape for entrepreneurs, loosening rigid labour laws and adopting investor-friendly laws to grow the economy.

The country is struggling to attract foreign capital, mainly because of concern about President Robert Mugabe’s black economic empowerment drive that forces foreign-owned companies to sell majority shareholdings to locals.

Economic analysts argue that high country risk, the Indigenisation Act and energy supply constraints are the main factors preventing Zimbabwe from meeting its development targets, for which it needs economic growth of more than seven percent a year.

“The political environment presents the most salient risk to our outlook for the Zimbabwean economy.

“If Zanu PF moderates its nationalistic stance, our forecasts will be rendered too pessimistic. However, if the party is even more aggressive in its efforts to indigenise the economy than we currently anticipate, gross domestic product (GDP) growth could well turn negative,” said BMI.

The southern African country, whose economy shrunk by as much as 40 percent between 2000 and 2008, saw growth averaging 10 percent from 2009-2012 after the adoption of foreign currencies to replace its hyperinflation-ravaged Zimbabwe dollar and the creation of a coalition government by Mugabe and the opposition, Movement for Democratic Change.

Zimbabwe Congress of Trade Unions (ZCTU) secretary-general Japheth Moyo said the first half of the year was hectic especially for workers as more companies were closed and thousands of workers thrown onto the streets.

“What we have realised is that the positives we have gained during the inclusive government have diminished,” he said adding that the labour organisation had recorded reports of company closures, people not getting their salaries and, employees failing to remit workers’ pension to National Social Security Authority (Nssa).

“As workers, this has been a hard year and we liken it to the 2008 era. We are not paid and the issues of liquidity crunch are still a reality,” Moyo said.

Economist Prosper Chitambara recently noted that the economy during the first half of the year was very fragile and weak and the major constraint, among others, was the liquidity crunch.

“We witnessed deindustrialisation and retrenchment of workers.  The imports figures remained high compared to exports,” he said adding that the Zimbabwe economy was not competitive.

“The government should reduce cost of doing business to achieve high production. Zimbabwe is a high cost economy as compared to other regional countries and the country should work on investment policies because investors want to invest where there is policy consistency,” he added.

Comments (1)

The truth of the matter is we will be having a negative figure

mwana wevhu - 18 August 2014

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