IMF predicts Zimbabwe economy to grow by 6% this year

The International Monetary Fund has predicted that Zimbabwe’s economy will grow by 6% this year on the back of a bumper agricultural harvest, increased energy production, and the resumption of greater manufacturing and construction activities.

In a statement following a virtual staff visit to Zimbabwe from 1- 15 June, the team said Zimbabwe had shown resilience in the face of the coronavirus pandemic and other exogenous shocks.

IMF staff team leader Dhaneshwar Ghura  said: “The pandemic, on top of cyclone Idai in 2019, a protracted drought, and weak policy buffers, has taken a severe toll on the economic and humanitarian situation. Despite the authorities’ timely actions to support the most vulnerable groups and businesses during the pandemic, real GDP contracted by 4 percent in 2020, after a 6 percent decline in 2019.

“However, an economic recovery is underway in 2021, with real GDP expected to grow by about 6 percent, reflecting a bumper agricultural output, increased energy production, and the resumption of greater manufacturing and construction activities. Uncertainty remains high, however, and the outlook will depend on the pandemic’s evolution, the pace of vaccination and implementation of sustainable policies.”

Zimbabwe has managed to contain the coronavirus pandemic and, though currently facing a surge in the number of cases, has recorded 40 556 cases and 1 640 deaths but 37 075 people have recovered leaving 1 841 active cases.

The IMF’s expected growth is closer to that by Zimbabwe’s treasury which put it at 7.4%. The World Bank was less optimistic putting it at 3.9%

Ghura said Zimbabwe’s efforts to stabilise the local currency and lower inflation backed by contained budget deficits and reserve money growth, as well as the introduction of a foreign exchange auction system, were policy measures in the right direction.

“Further efforts are needed to solidify the stabilization trends and accelerate reforms. The near-term macroeconomic imperative is to improve the coordination among fiscal, foreign exchange and monetary policies, while addressing COVID-19 related economic and humanitarian challenges,” he said.

“To this end, the authorities’ strategy and policies as embodied in their National Development Strategy need to be fully operationalized and implemented. Durable macroeconomic stability and structural reforms would bode well for the recovery and Zimbabwe’s development objectives.”

The local currency has stabilised at $85 to the United States dollar though there have been accusations from business that the auction rate is being manipulated because the black market rate is between $120 and $130 to the greenback.

Zimbabwe has introduced regulations to stop pegging prices using black market rates and has started naming and shaming companies that obtain foreign currency from the auction but abuse that facility.

Business expressed fears that the regulations will reverse the economic gains Zimbabwe had recorded since the introduction of auction system a year ago, but so far there is no evidence of that.

While inflation stood at 162% last month and the figure for this month is expected to be released anytime, United States economist Steve Hanke today put Zimbabwe’s inflation at 62.05% slightly higher than yesterday’s 60.98%.

When the official inflation was 162% last month, Hanke put his at 86%.

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