Zimbabwe Economy to Grow 3.5% in 2022, Downside Risk High, IMF Says

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HARARE – Zimbabwe’s economy is expected to grow by 3.5% this year and by 3% in 2023, the International Monetary Fund said late Thursday.

The authorities aim to limit the 2022 budget deficit at 1.5% of gross domestic product, the IMF said in a statement.

“The effects from the Covid-19 pandemic and protracted drought have compounded existing structural constraints and would lead to scarring on the economic outlook,” the IMF said.

Zimbabwe experienced severe exogenous shocks including Cyclone Idai, a protracted drought and the Covid-19 pandemic during 2019-2020, which along with policy missteps in 2019, led to a deep recession and high inflation, the IMF said.

Real GDP contracted cumulatively by 11.7% during 2019-20 and inflation reached 837% on year by July 2020, it said.

The current account balance turned into a surplus during 2019 through 2021, reflecting favorable metals prices, lower imports and a surge in remittances.

The predominant minerals in Zimbabwe include platinum, chrome, gold, coal and diamonds. The country boasts the second-largest platinum deposit and high-grade chromium ores in the world, with near 2.8 billion tons of platinum group metals and 10 billion tons of chromium ore, according to the U.S. Department of Commerce.

Real GDP rose by 6.3% in 2021 reflecting a bumper maize harvest, strong pickup in mining and buoyant construction. A tighter policy stance since mid-2020, relative to 2019, has contributed to lowering inflation to 60.7 % year-on-year at end-2021, the IMF said.

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“However, high double-digit inflation and wide parallel foreign exchange market premia have persisted,” the IMF said. “Poverty has risen and about a third of the population is at risk of food insecurity,” it said.

Zimbabwe remains in debt distress, with large external arrears to official creditors while international re-engagement has lagged as stakeholders seek political and economic reforms, the IMF said.

Source: Market Watch