ZIMBABWE needs a raft of measures to mitigate economic slowdown in the current year due to a number of constraints, chief among them being a likely negative impact of elections, analysts say.
This follows an African Development Bank (AfDB) report stating that most economic challenges the country faced in 2012 may spill into 2013, implying there may be challenges in attempts to boost growth.
In its Zimbabwe Monthly Economic Review for January, the bank said notable challenges included limited financing for productive sectors and high average lending rates. It noted that uncertainty concerning national elections might still adversely influence investor confidence, particularly in the first quarter of the year.
Bulawayo-based economist Erich Bloch told business digest the country’s economic recovery would be very small in the current year due to economic environmental challenges which were being worsened by a lack of security on investment as well as policy instability, especially during an election period.
He said policy uncertainty was of major concern among investors who were wary of a possible return to the use of local currency after elections.
“There are ongoing and wideranging fears that we are going to revert to our local currency and see the inflation levels of 2008. Because of that, people are very reluctant to keep their money in the formal banking system and that compounds the liquidity challenges,” said Bloch.
Compounding the problem, Bloch added, was a poor agricultural season resulting from a poor rainy season and an invasion in certain parts of the country by army worms.
Agriculture has traditionally been Zimbabwe’s major economic contributor, accounting for a significant size of foreign currency earnings and employment.
Economist Takunda Mugaga said government should tackle the issue of corruption to allow for faster economic growth.
The high level of graft in the country’s high offices had seen the economy ranking poorly on world indices as a competitive investment destination and as a national brand.
Mugaga also said lack of commitment to speedily implement policy reforms remained a significant challenge from a broader policy position. Proposed changes to the Mines and Minerals Act and Diamond Act, touted for completion either late last year or early this year, were yet to be fulfilled, he observed.
“It’s not just an issue of completing these laws. For instance, it’s a good development that the constitutional draft was completed, but the challenge is to have both a constitution and constitutionalism,” said Mugaga in a telephone interview.
The economist added government had to improve its fiscal performance to allow for growth, adding the current lack of funds to host the United Nations World Tourism Organisation general assembly, scheduled for August this year, was a clear testimony the economy was still in a rut.
Economic Planning secretary Desire Sibanda said the country would remain focused on its Medium Term Plan (MTP) strategy to increase investment inflows and industrial capacity utilisation.
He said this would be the cornerstone of government’s recovery strategy from last year’s poor economic performance, which recorded a 5,6% growth rate compared to the MTP’s economic growth targets of an average 7,1% annually between 2011 and 2015.
Sibanda believed the country could still achieve the average 7,1% growth rate for the five years to 2015 if the economic policies enunciated in the MTP were implemented.
“We will remain focused on increasing domestic savings by encouraging the culture of saving and transforming the economy from being a producer of raw materials to an exporter of finished products,” said Sibanda.
“Currently, minerals constitute over 50 % of Zimbabwe’s total exports, making mining a key economic driver of our economy. However, it has to be noted that more than 90% of our minerals are exported in raw form.”