The GoZ is engaged with the International Monetary Fund (IMF) on priorities for a stabilization program, including efforts to control inflation, increase the independence of the central bank, discontinue QFAs and multiple currency practices, improve coordination with fiscal authorities, and strengthen fiscal controls(IMF, 2022).
To be sustainable, this stabilization program should also put in place measures to mitigate the impact of policy adjustments on the most vulnerable.
Productivity is the ultimate driver of economic growth and living standards. Increasing productivity is essential for raising incomes and improving livelihoods. In fact, most of the difference in income per capita between countries can be explained by differences in total factor productivity (TFP).
Based on simulations of future growth of labor and capital, achieving high and sustained growth to converge with UMIC status will require growth rates of 8–9 percent per year. However, despite a well-skilled workforce, Zimbabwe’s labor productivity growth has remained depressed over the past two decades. Zimbabwe’s labor productivity level over the past decade ranks second to last among 17 LMIC economies in SSA.
Prior to the COVID-19 pandemic, macroeconomic stabilization and the implementation of reforms have boosted labor productivity in Zimbabwe, despite remaining lower than LMIC peers in SSA.
The economy has experienced lower employment growth rates than its peers across most sectors.
The COVID-19 pandemic has further widened Zimbabwe’s productivity gap with its peers. The COVID19 pandemic exacerbated Zimbabwe’s already weak productivity performance. It is now ranked last out of SSA LMICs.
Strict lockdown rules, needed to curb the spread of the pandemic, coupled with supply
disruptions, meant that most firms suffered a severe reduction in labor productivity growth. This decline in productivity growth was more adverse for firms in Zimbabwe than for firms in Zambia and Mozambique.
Overall productivity has been constrained by weak productivity in the agriculture sector. The GoZ has provided significant support to the agriculture sector since the early 2000s, recently in the form of command agriculture and input schemes. But despite large public support, growth of labor productivity and yields of major crops have been well below those in peer countries (this relates to LMICs in SSA).
Given that the agriculture sector accounts for two-thirds of the country’s employment, the performance of the sector has a major bearing on overall labor productivity. Recent gains in industry and services productivity growth have been offset by low productivity growth
in the informal sector.
On the one hand, productivity growth of industry and services has been significant, though it is still below its peers in SSA. Focusing on firm level data, Zimbabwe is on a par with its peers in SSA in terms of manufacturing sector productivity, and productivity is even above regional peers in subsectors such as food and chemicals.
On the other hand, the further expansion of informality in industry and services in recent years has offset these gains and served to pull down overall productivity. Despite
the decline in output informality between 2009 and 2019, output informality in 2019 remained above the level before the recession episode.
Creating more and better jobs in the formal sector will require policies that tackle obstacles to both formal and informal productivity growth.
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