Economy to grow by mere 1,2 percent

Zimbabwe’s ailing economy will grow by a mere 1,2% this year owing to political risk, a figure lower than the modest2,1% growth envisaged by government, a report says.


Local economic think tank Econometer Global Capital (Econometer) says government will not achieve its ambitious growth projections.

Government has targeted average gross domestic product growth of above 6% under its economic blueprint, Zimbabwe Agenda for Sustainable Socio-economic Transformation (ZimAsset).

While economic growth in 2014 is estimated at 3,1%, top local economist Godfrey Kanyenze attributed the performance to factors such as tight liquidity, low domestic savings, slow investment inflows and power supply shortages.

Finance minister Patrick Chinamasa last year halved projections from 6,1% to 3,1% owing to low business and investment confidence, scarce liquidity and subdued international prices for exports such as minerals.

For 2014, Kanyenze projected economic growth would virtually remain at a standstill at 3,2% in 2015, against ZimAsset targets of 6,1% in 2014 and 6,4% in 2015.

Econometer head of research Takunda Mugaga on Wednesday told businessdigest in an interview that political risk, coupled with growing non-performing loans(NPLs), deflation, poor revenue performances and flat banking deposits will weigh down the economy in the current year.

“Political risk is the major concern for 2015 because we believe it’s going to be a year of fighting back for the losers in Zanu PF,” he said in an interview.

“This will hurt economic performance and (President Robert) Mugabe is expected to announce changes to his Cabinet which will fuel intra-party conflict at the expense of economic issues.”

Mugaga said mining was this year not expected to make a significant contribution to economic growth as investment in the sector is anticipated to be low due to the prevailing hostile policy environment, particularly indigenisation.

“Due to tight liquidity, there is a generally low level of exploration and expansion hence we do not believe mining will spearhead growth,” he said.

The economist said agriculture is seen driving the 1,2% growth mainly on account of a bumper harvest expected with maize, tobacco, horticulture and dairy contributing much more significantly as compared to last year.

Mugaga said Zimbabwe’s policy environment was unfavourable to foreign direct investment, resulting in the economy being driven more by consumer spending rather than investment spending.
“One of the major threats to investment spending is lack of a defined interest rate regime; as such you can’t attract foreign capital because it’s so unpredictable and it’s a crisis,” he said.

Mugaga said deflation is expected to dominate the year in 2015, with the inflation rate to close the year at 0,65% while the NPL ratio is also seen growing from 20% at the end of 2014 to close the year at 26%.

Aggregate banking deposits are seen remaining constant at US$4,9 billion while revenue collections are projected to end the year at US$3,75 billion, with expenditures to breach the US$4,1 billion budget mark.

The South African rand is also projected to deteriorate by more than 10% to close the year at around +/-1:13.

Econometer said weighted capacity utilisation was anticipated to increase marginally to 38% from the current 36,3%.

“No new ZSE listings are expected for the entire year with the blue chip stocks such as Delta Corporation, Econet Wireless, Pretoria Portland Cement, British American Tobacco Zimbabwe, Hippo Valley and OK Zimbabwe to dictate pace of trading activity on the local bourse; these counters will offer defensive qualities that can limit the downward risk of equity portfolios,” Econometer said.


One Response to Economy to grow by mere 1,2 percent

  1. Sally January 11, 2015 at 10:23 am #

    zimbabwe’s economy went down by over 50% over the last decade and now that its growing its only growing by a miserly 2% we are growing from a low base so we need growth of double digits

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