World Bank downplays Zimbabwe’s growth prospects

The World Bank still expects the Zimbabwe economy to grow by 2,9 percent in 2021 following an estimated 10 percent slump in 2020, according to the latest report released by the global lender.

The 10 percent downturn is in contrast to what the Government estimated for 2020 as well as its projections for 2021.

Presenting the 2021 National Budget, Finance and Economic Development Minister Professor Mthuli Ncube said the economy would grow by 7,4 percent in 2021 while 2020 was estimated to contract by just 4,1 percent.

Central bank governor, Dr John Mangudya is of the view that the economy fared better than expected in 2020.

Towards the end of last year, Dr Mangudya told a ZNCC conference that the economy will “do better than (minus) 4,1 percent that was projected as GDP growth in 2020”.

“We think we are going to do between 2 percent and 3,5 percent negative growth, as opposed to 4,1 percent (negative growth because we have seen that the economy is not doing badly,” said Dr Mangudya.

He estimated that the manufacturing sector grew by a record 26 percent in the 11 months to November 2020.

The remarkable rebound in manufacturing is anticipated to cushion the domestic economy from brick bates of the marauding coronavirus and result in much less contraction of 2,1 to 3 percent, according to the central bank chief.

However, the World Bank maintained its June 2020 projections on Zimbabwe.

If indeed the economy fell by 10 percent in 2020, the out turn will rank as its deepest recession since 2003 when the economy contracted by 17,2 percent.

There are, however, some countries that are expected to fare worse than Zimbabwe in the Sub-Saharan region.

Seychelles is estimated to have contracted by 15,9 percent while Mauritius will fall by 12,9 percent.

Neighbours South Africa, Zambia, Mozambique and Botswana are estimated to have contracted by 7,8 percent, 4,5 percent, 0,8 percent and 9,1 percent respectively. The World Bank estimates the Sub-Saharan African region to have contracted by 3,7 percent last year mainly on the impact of the coronavirus pandemic. Growth for the region is forecast to resume at a moderate average pace of 3 percent in 2021-22—essentially zero in per capita terms and well below previous projections — as persistent outbreaks in several countries continue to inhibit the recovery.

At the time of writing this report, several countries including Zimbabwe and South Africa had imposed stricter lockdown measures. While the move is meant to curb the continued spread of Covid-19, it will devastate the economy.

Covid-19 is likely to weigh on growth in Sub-Saharan Africa for a long period, as the roll out of vaccines in the region is expected to lag that of advanced economies and major EMDEs, further dampening growth, according to the global lender.

As a result, living standards are likely to be set back a decade and tens of millions of people in the region could be pushed into extreme poverty cumulatively in 2020-21.

In Zimbabwe statistics released by Zimstat showed that the cost of living continues to increase in the country.

In November a person needed $4 426 not to be considered poor up from $3 750 in October.

This means the average Zimbabwean needed US$1,80 per day in November up from US$1,53 they needed in October.

Meanwhile, risks to the regional outlook are tilted to the downside and include weaker-than-expected recoveries in key trading partner economies, logistical hurdles that further impede vaccine distribution, and scarring of labour productivity that weakens potential growth and income over the longer term.

Global economic output is expected to expand 4 percent in 2021 but still remain more than 5 percent below its pre-pandemic trend. Moreover, there is a material risk that setbacks in containing the pandemic or other adverse events derail the recovery.

Global growth is projected to moderate to 3,8 percent in 2022, weighed down by the pandemic’s lasting damage to potential growth.

In particular, the impact of the pandemic on investment and human capital is expected to erode growth prospects in emerging markets and developing economies (EMDEs) and set back key development goals.

However, the global recovery, which has been dampened in the near term by a resurgence of COVID-19 cases, is expected to strengthen over the forecast horizon as confidence, consumption, and trade gradually improve, supported by ongoing vaccination.

The possibility of a further increase in the spread of the virus, delays in vaccine procurement and distribution, more severe and longer-lasting effects on potential output from the pandemic, and financial stress triggered by high debt levels and weak growth will provide downside risks to the growth projections, according to the World Bank. – Business Weekly