FBC Securities sees Zimbabwe maintaining the economic growth trajectory from last year given the positive developments in mining and tourism, which make up the key sectors that drive the Southern African country’s economy.
The country’s mining sector has immense potential to drive socioeconomic development and growth, underpinned by strategies designed to transform the sector to a US$12 billion industry by 2023.
The tourism sector has on the other hand witnessed growth following the relaxation of Covid-19-induced travel restrictions and lockdowns.
The securities research firm said in its third quarter Zimbabwe economic review report that the country’s tourism sector was on a growth trajectory with tourist receipts increasing by 121 percent to US$337,5 million, compared to US$152,8 million during the same period last year.
During the first half of the year, tourist arrivals were up 115 percent compared to the same period last year.
“We anticipate increased economic activity ahead of the festive season, particularly for businesses in the consumer sector.
“Convergence of the official and parallel market rates, coupled with improved availability of foreign currency is also a positive development for local businesses,” it said.
Following Government interventions aimed at taming inflation and market indiscipline, inflation began to decelerate. Inflation data has shown a decline in monthly inflation from 30,7 percent in June to 3,5 percent in September 2022.
The country has witnessed relative stability in the foreign currency exchange rate in recent weeks and FBC Securities said if sustained, this may result in equilibrium between the willing buyer willing seller (WBWS) rate, interbank, and the alternative rate.
To further liberalise the foreign exchange market, authorities increased the maximum amount entities can purchase from banks for bona fide foreign payments under the willing-buyer willing-seller system from US$20 000 to US$100 000 per week per entity.
FBC said further liberalisation of the foreign exchange market will increase the availability of foreign currency, ease pressure on the official auction, and aid in taming currency devaluation.
It said the introduction of gold coins had provided investors with an alternative asset class and assisted the Government in mopping up excess RTGS liquidity.
A total of 9 516 gold coins valued at $9 billion (Zimbabwe dollars) had been sold as of September 23, 2022, with 35 percent having been purchased by individuals and 65 percent by corporates. FBC Securities noted that growth may, however, be below the 4,6 percent projected by Finance and Economic Development Minister Mthuli Ncube in his mid-term budget review owing to restrictive factors such as the currency crisis, inflationary pressures, liquidity constraints and power shortages.
“We also note the upward revision of interest rates, increasing the cost of borrowing, as a limiting factor to desired growth projections as it weighs down aggregate demand,” it said.
The Government revised economic growth forecasts for 2022 from initial projections of 5,5 percent to 4,6 percent, citing continued global and domestic inflationary pressures, global geopolitical tensions, and the consequences of ongoing global warming and the Covid-19 pandemic.
The International Monetary Fund also expects Zimbabwe’s economy to decline by around half of its 2021 levels to 3,6 percent in 2022 with the decline attributed to a slowdown in agriculture and energy outputs and rising macroeconomic instability, amidst a recovery in mining and tourism.
Agriculture, one of the country’s economic mainstays, is projected to contract by negative growth of five percent from an initial 5,1 percent growth projection.
FBC Securities said low rainfall, input distribution bottlenecks, and high cost of inputs have largely been restrictive factors for agricultural output.
“The country is however, expected to reach self-sufficiency with a wheat harvest of 380 000 tonnes. “Given the volatility of global wheat prices in the current year and supply disruptions, this would be a positive development for the country in terms of controlling the import bill as well as improving food security,” it said.
Gold deliveries to Fidelity Printers and Refinery grew 35,28 percent in the nine months to September.
