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