FINANCE minister Tendai Biti has painted a gloomy outlook of the economic situation, warning the economy could slide into recession if the make-or-break elections next year turn out to be violent.
Report by Chris Muronzi
Apart from the threat posed by electoral violence to the economy, Biti said the projected 5% GDP growth next year depended largely on whether the country receives normal rainfall and benefits from firming commodity prices on the international market.
Should the country receive poor rains and commodity prices fall, growth would be lower than the targeted 5%.
“The 2013 national budget is predicated on an active policy scenario which projects overall GDP growth of 5% in 2013 and levels of above 6% in 2014 and 2015, mainly driven by mining, agriculture, manufacturing, tourism and construction,” Biti said in his budget speech.
“A good agricultural season, together with improved preparations, is anticipated to underpin agriculture, while improved investment and supply of power are expected to support operations in the mining sector.”
He added: “The above growth and investment projections assume a stable macro-economic and political environment accompanied by a consensus on credible and consistent policies.”
Government revised downwards the country’s economic growth projection for 2012 to 4,4% from an initial 5,6% as stated in the mid-term review. The target was originally 9,4%.
Biti said in the event electoral violence similar to that of 2008 recurred, the damage to the economy would be worse. The economic gains achieved since then would be like two steps taken forwards against 20 backwards.
Biti bemoaned the lack of fiscal space, saying of the total revenues of US$3,8 billion anticipated in 2013, translating to 34,5% of GDP, recurrent expenditures of US$3,3 billion, representing 86,4% of the total budget left only US$500 million, or 13,6% of the budget, for capital development.
Biti sees inflation being contained within the single digit levels on account of prudent macro-economic management through fiscal austerity, improved supply and competitiveness.