AfDB Lowers Zimbabwe’s 2024 Growth Forecast Amid Drought and Debt Concerns

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HARARE, – The African Development Bank (AfDB) has revised Zimbabwe’s economic growth forecast for 2024 downward to 2%, a significant reduction of 1.6 percentage points from its previous projection.

This adjustment comes in response to a combination of factors including drought, weak commodity prices, and substantial debt.

In its newly released Africa Outlook report according to NewZwire, the AfDB highlighted that Zimbabwe’s GDP grew by 6.1% in 2022 and by 5% in 2023. However, the bank anticipates a sharp decline in 2024 due to reduced agricultural output caused by the El Niño-induced drought.

“The downside risks are elevated due to the drought caused by El Niño weather patterns that have affected the agriculture sector, while unstable international commodity prices pose further risks to the mining sector,” the AfDB stated. The bank projects inflation in Zimbabwe to average 24.9% in 2024 as the exchange rate stabilizes.

Despite the AfDB’s forecast, the Zimbabwean government maintains a more optimistic outlook, expecting 3.5% growth in 2024. However, Finance Minister Mthuli Ncube has acknowledged that this estimate might be revised downward if the drought’s impact continues to worsen.

According to the AfDB, the global economic slowdown poses a major risk to Zimbabwe’s economic outlook. The country must focus on stabilizing its currency to restore economic stability.

“Zimbabwe expects to adopt a Staff Monitored Program (SMP) of the IMF in the second half of 2024. Maintaining the ZiG exchange rate stability and eliminating the quasi-fiscal operations of the RBZ and transferring all its liabilities to the Treasury could underpin macroeconomic stability,” the report noted.

Growth in the Southern Africa region is projected to increase slightly from an estimated 1.6% in 2023 to 2.2% in 2024 and 2.7% in 2025, reflecting a modest upgrade of 0.1 percentage points for both years compared to the January 2024 forecast.

The AfDB, which is at the forefront of efforts to secure an arrears clearance deal for Zimbabwe, has called for comprehensive reforms of the global financial system to assist debt-distressed economies like Zimbabwe.

“Multilateral external arrears in many countries have reduced access to concessional financing from international financial institutions. Normalization of relationships in many cases requires arrears clearance before a country can regain access to new financing,” the report emphasized.

In Zimbabwe, this situation has exacerbated solvency issues, turning them into a liquidity crisis, leading to exchange rate pressures and hyperinflation. The AfDB stressed the necessity for reforms in the international financial architecture to offer more flexibility for countries with accumulated arrears that urgently need emergency financing.