The World Bank has lowered Zimbabwe’s economic growth forecast to a modest one percent this year from an initial projection of 3.2 percent, its worst performance in five years due to falling commodity prices, but is seen recovering in the next two years.
After recording double digit growth rates following the adoption of the multi-currency regime in 2009, Zimbabwe, like the rest of the commodity-driven sub-Saharan region, is now suffering due to an underperforming Chinese economy which has driven commodity prices down.
The World Bank projection remains the most optimistic after local investment and brokerage firm, Invictus in April forecast the GDP to decline by four percent, reflecting the poor commodity prices and lower than expected agricultural output.
Independent economist John Robertson has predicted a five percent decline, with manufacturing contracting further.
Zimbabwe is also suffering from lack of domestic liquidity which, combined with poor foreign direct inflows (FDI), will continue to have a negative impact on growth.
Inflation came in at -2.81 percent for June, and analysts say Zimbabwe’s economy risks being caught in the trap of deflation, with corporate earnings seen shrinking further unless the country restores investor confidence to attract investment.
According to the World Bank Global Prospects Report for June, growth in Sub-Saharan Africa is projected to slow to 4.2 percent on average in 2015 from 4.6 percent in 2014. The multilateral lender sees Zimbabwe’s economy growing by 2.5 percent and 3.5 percent in 2016 and 2017 respectively.
“Slower-than-expected growth in China would weigh on demand for the region’s commodities, driving prices down. A further decline in the already depressed price of metals would lead to a significant drop in export revenues in many countries,” reads the World Bank report.
“A scaling down of operations and new investments in these countries in response to the lower prices would reduce output in the short run, and slow growth momentum over an extended period of years.”-The Source
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