ECON­OMY PRO­JECTED FOR SLOW GROWTH Strong head­winds weigh down progress An­nual head­line in­fla­tion still neg­a­tive

Chronicle (Zimbabwe) - - Business Chronicle - Pros­per Ndlovu

ZIM­BABWE’S econ­omy is pro­jected to grow by 1,2 per­cent against the tar­geted 2,7 per­cent at the close of 2016 on the back of “strong head­winds” that con­tinue to weigh down on progress, Fi­nance and Eco­nomic De­vel­op­ment Min­is­ter Pa­trick Chi­na­masa has said.

The Gov­ern­ment had pro­posed a na­tional bud­get of $4 bil­lion for 2016, premised on an­tic­i­pated rev­enues of $3.85 bil­lion, and a pro­jected do­mes­tic fi­nanc­ing gap of $150 mil­lion.

In his mid-term fis­cal pol­icy re­view state­ment yes­ter­day, Min­is­ter Chi­na­masa said the first half of 2016 has been a rough patch for Zim­babwe and point­ing out nu­mer­ous con­straints that hin­dered growth.

The min­is­ter cited de­pressed in­ter­na­tional com­mod­ity prices, par­tic­u­larly for min­er­als, lim­ited do­mes­tic and for­eign di­rect in­vest­ment, “also as­so­ci­ated with our debt over­hang”, the grow­ing fis­cal deficit, which im­pacts on the liq­uid­ity of the fi­nan­cial sys­tem, as well as on busi­ness ac­tiv­ity and the re­sul­tant over­all fall in in­comes and weak­en­ing of do­mes­tic ag­gre­gate de­mand as ma­jor bar­ri­ers.

“The econ­omy is fac­ing strong head­winds, with ma­jor chal­lenges be­ing ex­pe­ri­enced in the econ­omy and busi­ness ac­tiv­ity dur­ing the first half of the year than what the 2016 Na­tional Bud­get an­tic­i­pated.

“This pri­mar­ily re­flects down­side risks as­so­ci­ated with: The im­pact of the drought on our agri­cul­ture, with at­ten­dant sup­ply chal­lenges along the agro-pro­cess­ing link­age value chain,” said Min­is­ter Chi­na­masa.

“The above chal­lenges are un­der­min­ing per­for­mance of our key pro­duc­tive sec­tors, in­clu­sive of agri­cul­ture, min­ing, man­u­fac­tur­ing, tourism, con­struc­tion and ser­vices.

“As a re­sult, the real eco­nomic growth rate, which was tar­geted for the 2016 na­tional bud­get at 2.7 per­cent, is now pro­jected much lower at 1.2 per­cent.”

The min­is­ter said de­fla­tion­ary con­di­tions for both food and non-food cat­e­gories per­sisted dur­ing the first half of 2016 with an­nual head­line in­fla­tion re­main­ing neg­a­tive, “al­beit ac­cel­er­at­ing from -2.19 per­cent in Jan­uary 2016 to -1.4 per­cent in June 2016”.

The min­is­ter at­trib­uted the con­tin­ued de­cline in prices in 2016 to both food and non­food in­fla­tion, un­der­pinned by the sus­tained de­pre­ci­a­tion of the South African rand, sub­dued in­ter­na­tional oil prices; and wan­ing do­mes­tic de­mand.

On the out­look, Min­is­ter Chi­na­masa said in­fla­tion was ex­pected to re­main broadly sub­dued, sus­tained by a weak South African rand against the US dol­lar and low in­ter­na­tional crude oil prices.

“An­nual av­er­age in­fla­tion for the year is pro­jected to be -0.4 per­cent, up from -2.4 per­cent recorded in 2015,” he said.

Of the to­tal bud­get, he said that re­cur­rent ex­pen­di­tures were es­ti­mated at $3.685 bil­lion while $315 mil­lion was ap­proved for de­vel­op­ment pro­grammes.

Min­is­ter Chi­na­masa said while rev­enue per­for­mance of $1.692 bil­lion was re­alised dur­ing the first half of the year — though sub­dued by the de­clin­ing mo­men­tum in eco­nomic ac­tiv­ity — re­flected pos­i­tive gains dur­ing the sec­ond quar­ter of 2016.

He said dur­ing the pe­riod Jan­uary to June 2016, rev­enue un­der-per­for­mance against over­ex­pen­di­tures re­sulted in a cu­mu­la­tive bud­get deficit of about $623.2 mil­lion, far above the full-year tar­get of $150 mil­lion.

The min­is­ter said fail­ure to con­tain the bud­get deficit in the short­est pos­si­ble time will worsen the deficit to an es­ti­mated year-end level of over $1 bil­lion.

As such, he said, fi­nanc­ing of the bud­get deficit has been pri­mar­ily through is­suance of trea­sury bills by the Re­serve Bank on be­half of the Gov­ern­ment.

Min­is­ter Pa­trick Chi­na­masa

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