IMF bullish on Zimbwabe’s growth
ZIMBABWE’s economy will grow by three percent this year up from 0,7 last year owing to improved agriculture production, the International Monetary Fund has concluded.
In its Staff Report for the 2017 Article IV Consultation released on Friday, the IMF however warned of rising inflation, which it said could reach seven percent by year-end.
The growth projections fall short of Government’s forecast of 3,7 percent.
Finance and Economic Development Minister Patrick Chi- namasa recently revised his 2017 growth forecast from 1,7 percent citing an anticipated bumper maize harvest on the back of a good farming season.
However, the IMF expects the current liquidity challenges to continue hampering growth in the short-term.
The report reads, “Aided by the rebound in agriculture, growth is expected to pick up in 2017 in an environment of rising inflation and a narrowing current account deficit.
“Following the drought in 2015–16, staff estimates that the strong harvest on the back of a good rainfall season, favourable prospects for gold, chrome and tobacco exports, and lower demand for imported food, could allow real GDP to grow by 2,5– three percent in 2017.
“The authorities are more optimistic in their projections (3,7 percent) as they expect higher growth in manufacturing and services.
“Staff argued that insufficient liquidity will continue to hamper imports and affordable financing, encumbering growth prospects. Inflation and inflation expectations will rise in line with money creation and increasing import prices due to the controls. Annual average inflation is set to be 2–3 percent, which implies an increase to about 7 percent by year-end.
“The external current account deficit is projected to continue to narrow to about 3¾ percent of GDP (from an average of 13¼ percent in 2012–15), still affected by diminished imports.
“The IMF proposes stricter fiscal discipline by Government as well as structural reform to spur further growth in its medium-term outlook.
“Physical infrastructure is adequate; human capital is high; and agriculture, mining, and industry have substantial underutilised capacity and offer significant opportunities for domestic value addition.”
It goes on: “Structural reforms to attract investment could support growth, notwithstanding the necessary fiscal contraction.
“Moreover, political and governance reforms, including on human and property rights, could support the re-engagement objective, thereby facilitating debt treatment and unlocking financial support, both essential lubricants of economic recovery.”
Government is instituting a raft of structural and regulatory reforms covering the ease of doing business, special economic zones and rationalisation of the public service to spur growth.
Further interventions like Command Agriculture and the Presidential Inputs Support Scheme have already begun bearing fruit with the country set to save over US$200 million from grain imports.
As such the IMF sees opportunity for future growth in Zimbabwe.
“While the risks on the downside are clear and immediate, there are also significant opportunities on the upside,” said the institution.
“Zimbabwe has a strong endowment of natural resources and human capital. The formal economy is facing severe difficulties, but the resilience of the informal sector is suggestive of the speed with which the economy could recover given the right policy framework.”