Zimbabwe’s economy is this year seen contracting by four percent, weighed down by weak mineral prices and poor foreign direct investment flows, research by a brokerage firm has shown.
Government and the World Bank have projected a 3.2 percent growth this year premised on stability and higher mineral prices.
But Invictus, in its latest research paper, warned that the economic outlook was bleak because of the underperformance of the country’s economic drivers—agriculture and mining.
“Zimbabwe’s short-term economic outlook is bleaker now than at any time since the hyperinflationary meltdown of 2007/8. Real GDP will fall this year by at least three percent and the outturn could be much worse depending on the 2015 harvest and outlook for key commodity prices, including tobacco, base and precious metals,” said Invictus.
“We expect GDP to decline by four percent in 2015 reflecting lower commodity prices and lower than expected agricultural output. The lack of domestic liquidity combined with poor FDI flows will continue to have a negative impact on growth.”
The slowdown in growth in 2014 and 2015 reflects greater structural issues such as trends in investment, employment, living standards and poverty that needs to be addressed, it added.
Official figures show that Zimbabwe has lagged regional peers in FDI, with neighboring Zambia receiving $8 billion in FDI between 1980 and 2013, Mozambique $16 billion but only $1.8 billion for Zimbabwe.
“In Zimbabwe agricultural output, which grew some 20 percent in 2014 and kept the economy out of recession for most of the year, will fall sharply this year. Mining and manufacturing will decline modestly as will retail activity,” said Invictus.
“The tobacco outlook is poor – a combination of a smaller crop, lower prices and the 2014 overhang of leaf bought by merchants but not yet sold on to export markets. Metal prices are at their lowest since mid-2009 and 45 percent below their April 2011 peaks, but food and agricultural raw materials have fared better and are 23 percent off their record highs. Oil prices are down 53 percent from their April 2011 peak.”- The Source
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