6,6pc growth rate tar­geted Govt looks to man­u­fac­tur­ing, agri­cul­ture for eco­nomic growth

Chronicle (Zimbabwe) - - Business - Harare Bureau

THE Gov­ern­ment is tar­get­ing an aver­age eco­nomic growth rate of 6,6 per­cent over 2016 to 2018 driven by man­u­fac­tur­ing and agri­cul­ture sec­tors.

The eco­nomic growth tar­gets are con­tained in the fi­nal draft of the in­terim poverty re­duc­tion strat­egy pa­per for the pe­riod 2016-2018, which looks at vir­tu­ally all sec­tors of the do­mes­tic econ­omy. The pol­icy thrust was crafted by the Min­istry of Fi­nance and Eco­nomic Devel­op­ment with in­put from stake­hold­ers.

The strat­egy pa­per en­vis­ages near dou­ble digit growth of the econ­omy in the fi­nal two years of its im­ple­men­ta­tion, which is 2017 /18. Fi­nance and Eco­nomic Devel­op­ment Min­is­ter Pa­trick Chi­na­masa had ini­tially fore­cast the econ­omy to ex­pand by 2,7 per­cent this year, but re­vised the growth tar­get to 1,4 per­cent on ac­count of fall­ing global com­mod­ity prices and the neg­a­tive im­pact of the drought.

“The strat­egy tar­gets an aver­age an­nual growth rate of 6,6 per­cent dur­ing the pe­riod 2016-2018, with 2017 and 2018 pro­jected to grow by 9,5 per­cent and 8,9 per­cent, re­spec­tively,” reads an ex­cerpt from the poverty re­duc­tion pa­per dated Au­gust 1, 2016.

In terms of other macro-eco­nomic tar­gets, the poverty re­duc­tion strat­egy pa­per is tar­get­ing an­nual in­fla­tion of 0,6 per­cent, an in­ter­est rate regime that pro­motes sav­ings and fosters in­vest­ment, cur­rent ac­count deficit of not more than 10 per­cent of GDP.

In ad­di­tion, other macroe­co­nomic tar­gets in the pa­per in­clude re­serves of at least three months im­port cover by 2018 and bud­get deficit of 1,2 per­cent of gross do­mes­tic prod­uct in 2017 and 2018.

In essence eco­nomic growth is en­vis­aged to be driven by agri­cul­ture, hunt­ing and fish­ing; man­u­fac­tur­ing; elec­tric­ity and wa­ter; con­struc­tion; fi­nance and in­sur­ance; real es­tate; dis­tri­bu­tion, ho­tels and restau­rants; and trans­port and com­mu­ni­ca­tion.

Gov­ern­ment is still bat­tling a mul­ti­plic­ity of fac­tors mil­i­tat­ing against growth of the econ­omy, af­ter the post dol­lar­i­sa­tion boom that lasted only un­til 2012, be­fore start­ing to de­cline sharply in 2013.

Af­ter Gov­ern­ment in­tro­duced the mul­ti­c­ur­rency sys­tem in Jan­uary 2009, Zim­babwe wit­nessed price sta­bil­ity and im­proved busi­ness con­fi­dence, re­sult­ing in an in­crease in ca­pac­ity util­i­sa­tion from around 10 per­cent dur­ing re­ces­sion to around 40 per­cent by end 2009, and pos­i­tive eco­nomic growth of 5,4 per­cent. This pol­icy slowed down black mar­ket ac­tiv­i­ties, elim­i­nated ar­bi­trage op­por­tu­ni­ties and dis­si­pated in­fla­tion ex­pec­ta­tions and im­me­di­ately killed­off hyper-in­fla­tion. Goods be­came avail­able in for­mal mar­kets.

The multi-cur­rency an­chored eco­nomic re­cov­ery saw real GDP growth peak­ing at 11,9 per­cent in 2011, be­fore de­clin­ing to 10,6 per­cent in 2012. How­ever, the re­cov­ery re­mained highly frag­ile be­cause of in­fra­struc­ture and other macroe­co­nomic fun­da­men­tals, which re­mained weak, re­sult­ing in a real GDP growth of 4,5 per­cent in 2013.

The trend in eco­nomic growth is now around 1-2 per­cent per an­num fol­low­ing the end of the multi-cur­rency eco­nomic growth boom in 2012. Real GDP growth slowed down from 3,8 per­cent in 2014 to 1,5 per­cent in 2015 and 2016 fore­cast, largely due to the im­pact of the drought, which is tak­ing a toll on agri­cul­ture pro­duc­tion.

Agri­cul­tural pro­duc­tion rep­re­sents a broadly con­stant share of to­tal out­put (12 per­cent in 2014), while ser­vice sec­tors are gen­er­ally ex­pe­ri­enc­ing dy­namic growth. How­ever, the man­u­fac­tur­ing and min­ing sec­tors are strug­gling to cope with ris­ing cap­i­tal costs, a dif­fi­cult busi­ness cli­mate and de­clin­ing com­pet­i­tive­ness. The de­pre­ci­a­tion of the South African rand against the US dol­lar in par­tic­u­lar has weak­ened Zim­babwe’s com­pet­i­tive­ness against its main trad­ing part­ner, South Africa.

The min­ing sec­tor is ex­pe­ri­enc­ing a struc­tural tran­si­tion, as the com­mod­ity price su­per-cy­cle ends. As a re­sult there has been a shift in eco­nomic ac­tiv­ity from in­dus­try to ser­vices, par­tic­u­larly fi­nance, in­sur­ance, con­struc­tion and in­for­ma­tion and com­mu­ni­ca­tion tech­nol­ogy (ICT).

Min­is­ter Pa­trick Chi­na­masa

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