Zimbabwe economic growth outpaces peers

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Zimbabwe registered faster economic growth in 2018 compared to the average growth for the rest of Sub-Saharan Africa, despite battling a myriad of challenges besetting the economy, chief among them critical shortage of foreign currency.

The domestic economy is expected to have grown by 4 percent last year while the average annual growth for the rest of the sub-region, generally considered to have relatively more stable economic jurisdictions, came in at an average 3,2 percent.

Although Zimbabwe continues to face headwinds that include acute foreign currency shortage, unstable but improving fuel situation, low industrial capacity, dented investor confidence from the violent stay away, higher inflation and cost of doing business, the economy is projected to register further nominal growth this year.

Economic analysts forecast sustained economic growth this year, albeit slightly slower than Treasury’s projection, on the back of reforms Government will undertake or is already implementing in 2019, including reining in public expenditure, privatisation and reform of parastatals (state entities) and operationalisation of new procurement regulations among others.

Government is also in an unrelenting drive to attract global capital by engaging and reengaging global peers, as well as settling overdue foreign debt arrears amounting to US$6,9 billion, to reopen access to affordable long-term lines of credit.

Finance and Economic Development Minister Professor Mthuli Ncube projected in his 2019 National Budget that Zimbabwe’s Gross Domestic Product (GDP) will this year grow by 3,1 percent, however, slower than the International Monetary Fund and World Bank projections of 4,2 percent and 3,9 percent, respectively.

According to a local research firm, Inter Horizon (IH) Securities, the trade war between China and the United States affected most emerging markets, leading to slow growth in Sub-Saharan Africa, particularly Angola, Nigeria and South Africa.

“On the domestic front, the Zimbabwean economy outperformed its sub-Saharan peers, at 3,2 percent in 2018, as it remained on a nominal upward trajectory in 2018.

“The economy is expected to have grown 4 percent in 2018 versus 3,7 percent growth in 2017, although underperforming Government’s initial projection of 4,5 percent,” IH said.

“We believe that the country is poised for further nominal growth based on Government’s efforts to turn the economy around. Although the IMF and World Bank are optimistic about the growth through their 4,2 percent and 3,9 percent growth projects, our base case view is that GDP will grow 2,6 percent in 2018 — we anticipate sustained growth in agriculture and mining output,” IH Securities said.

The growth is estimated to have been on the back of strong performance in agriculture, mining and construction, as well as the service sector and IH Securities said the growth was evident in corporate earnings, which stood at record-highs.

A strong performance was recorded across most key sectors of the economy such as agriculture (up 12,4 percent), mining (up 26 percent) and manufacturing (2,8 percent), among others.

Tobacco outperformed initial projections and output came in at an all-time high of 258 million kilogrammes, well in excess of the previous high of 235 million kg achieved in 1999.

There were notable positive developments in the manufacturing sector, characterised by new plants by some companies, expansions and resuscitation of production by others, particularly in the foodstuffs, beverages and metal products sub-sectors.

A Confederation of Zimbabwe Industries survey showed that Zimbabwe manufacturing grew by percentage points to 48 percent in the year to August 2018, before starting to slow down.