IMF jets-in to review Zimbabwe economic outlook

International Monetary Fund Zimbabwe representative Patrick Imam

The International Monetary Fund (IMF) has started reviewing projected economic outlook for Zimbabwe for 2020 with preliminary indications pointing to a number of headwinds the lender thinks may weigh down growth.

IMF representative in Zimbabwe, Patrick Imam, told The Herald Finance & Business in an interview last week that the Bretton Woods institution was in the process of collating and updating data on projections for the year.

By and large, although the IMF thinks the domestic economy has potential, it believes the economy will continue to buckle under the weight of weak agricultural production, inadequate power supply and lacklustre growth in manufacturing.

Zimbabwe is projected to have registered economic contraction for the first time last year, after enjoying stellar to moderate growth since dollarisation in February 2009, which, however, started to slow down in 2012.

Notably though, Mr Imam said Zimbabwe will rest its hopes for the upside on strong performance of exports, at a time domestic demand is subdued given impact of runaway inflation, which salaries have not matched.

“The key for the upside is exports. Domestic demand obviously is subdued you know people’s incomes have not increased; there is little credit in the economy. So much of the growth will have to come from the export sector,” he said.

Economist John Robertson says Zimbabwe needs to fix problems in agricultural productivity, which dipped as the country moved to address land inequalities, as given the strong interdependency with manufacturing.

The IMF had late last year forecast Zimbabwe’s economy to grow by 2,7 percent this year from 3,8 percent it had forecast a few months earlier, mainly driven by expected recovery of the agriculture and mining sectors.

Last year, the IMF estimated the economy would shrink by 7,1 percent in 2019 weighed down by the drought and impact of cyclones Idai and Kenneth, which left trails of destruction in parts of Manicaland and Masvingo.

Cyclones Idai and Kenneth damaged infrastructure such as schools, hospitals, roads and bridges as well as homes while killing many, injuring scores and leaving hundreds of thousands in the affected areas food insecure.

Finance and Economic Development Minister Mthuli Ncube projected a 3 percent growth this year, from anticipated decline of 6,5 percent driven by improved agriculture and better rains, mining and manufacturing output.

His 2020 Budget is focused on “higher productivity, growth and job creation” while ensuring competitiveness, promotion of more sustainable and inclusive development, export diversification and import substitution.

Minister Ncube said growth will be primarily premised on key assumptions of a better rainy season, better planning for increased agricultural production, improved macroeconomic stability, extension of supportive tax and non-tax incentives and advancing implementation of ongoing ease of doing business reforms.

Regardless, the IMF said: “We are just in the process of revising as we speak, next week (this week) the projections will come out, we have a board meeting this week and you will see our projections which were established last year,” Mr Imam said.

However, Mr Imam said the assumptions on which the outlook projections were made last year may have to be re-looked “because quite a few things have changed” since then, which may prompt revised growth forecasts.

The impact of drought and natural disasters, coupled with negative shocks of the reform programme, may see Zimbabwe fail to meet some of the targets under the IMF’s staff monitored programme, which might need rescheduling.

Zimbabwe’s economy is battling the impact of acute shortage of foreign currency for key raw material imports, inconsistent or erratic supply of power as well as country wide shortage of both diesel and petrol.

“Our numbers are a bit lower than what the Government has, but they may have to be revised as we get more information. I saw CZI for example, the numbers from their survey suggested manufacturing growth will be quite negative in 2020,” Mr Imam said.

He added that indications were that agriculture, which Minister Mthuli had projected to grow, might perform worse than drought-hit 2018-2019 season on account of late onset of the rains and its uneven distribution.

Mr Imam said it appeared as though electricity generation may be quite low again in 2020 on account of low lake water levels at Kariba, where the amount of “live water” (usable for power generation) is now below 6 percent.

He said the full impact of power shortage will be minimised by investments many firms have made in solar. Minister Ncube also said early last month he had set aside $8,5 billion for power imports.

However, Mr Imam stressed that the information they have currently, was more of anecdotal evidence the global lender was still working to get more hard evidence to back scientific projections of the economic outlook.