Zim hints at weakening of new currency

WASHINGTON - The global economy has hit its weakest spell since the global financial crisis

The global economy’s sharp loss of speed through 2018 has left the pace of expansion the weakest since the global financial crisis a decade ago, according to Bloomberg Economics.

Its new GDP tracker puts world growth at 2.1 percent on a quarter-on-quarter annualised basis, down from about 4 percent year.

While there’s a chance that the economy may find a foothold and arrest the slowdown, “the risk is that downward momentum will be self-sustaining, say economists Dan Hanson and Tom Orlik.

The reasons for hope? The in the middle of last

HARARE - Zimbabwe’s central bank governor on Monday said the exchange rate for the new transitional currency is unlikely to remain at 2.5 per U.S. dollar by the time tobacco auctions open next week, suggesting the local unit will be devalued further.

The southern African nation faces a dearth of dollars that has caused shortages of fuel, drugs and food and hobbled an economy yet to recover from the disastrous rule of Robert Mugabe, who was removed in a coup in 2017.

The Reserve Bank scrapped its discredited 1:1 dollar peg for surrogate bond notes and electronic dollars last month, merging them into a lower-value transitional currency called the RTGS dollar, which has been stuck at a rate of 2.5 to the greenback.

Many companies have, however, Federal Reserve’s decision to pause its interest-rate hikes, a US-China trade truce and the fading of the shocks that battered Europe in 2018 could mean stabilisation is around the corner.

Other central banks have also stepped up, with the European Central Bank last continued to hold onto their dollars waiting for the RTGS rate to weaken further, while most individuals sell their greenbacks on the black market, where US$1 bought 3.8 RTGS dollars on Monday.

Central bank chief John Mangudya said the official exchange rate was expected to change by the time auctions for tobacco, Zimbabwe’s second-largest earner of foreign currency after mining, open on March 20.

“We do believe that before or on that date the rate will have reached its equilibrium.

We don’t believe it will still be 2.5 (to the U.S. dollar),” Mangudya said.

Mangudya maintained that the market would determine the exchange rate, after accusations of manipulation by the central bank. week announcing new measures to help the economy through the current weakness.

And despite the gloom, ECB policy makers have been keen to put a brave face on the deterioration, pushing the view it’s a slowdown, not a recession.

“We are still seeing robust economic growth, although

But he ruled out a sharp devaluation, which he said would result in a further spike in annual inflation.

The governor said average annual inflation was expected to fall to 10 to 15 percent by the end of this year.

He also said that any huge salary increases for public workers would add to inflationary pressure.

Mangudya said an average $12 million had been traded every week at the current forex interbank rate since February 22, when banks started selling dollars to large corporates.

Exporters, including miners and tobacco farmers, receive half their earnings in the RTGS currency at the official exchange rate, while the other half, which is deposited in their foreign currency accounts, must be sold within 30 days. it’s less strong than before,” Executive Board member Benoit Coeure said in an interview with Italian newspaper Corriere della Sera published on Monday.

“It will take longer for inflation to reach our objective, but it will get there. We are reacting to the developments we have seen so far.”

“The cyclical upswing that took hold of the global economy in mid-2017 was never going to last. Even so, the extent of the slowdown since late last year has surprised many economists, including us.”

There has been a modest pickup in some economic numbers recently, including figures out of China signalling an improvement in credit supply. . – BLOOMBERG.