FINANCE minister Herbert Murerwa insisted in his budget statement yesterday that the economy will grow despite the absence of the key economic indicators
and policies to support his claims.
In his multi-trillion dollar budget which analysts described as a huge disappointment, Murerwa said he expected the economy to grow by between 0,5 to 1% next year. He said the growth would be underpinned by increased production in agriculture, mining and tourism.
“This is due to the anticipated improved performance in agriculture and mining,” said Murerwa.
However, judging by the trend in previous budgets, very few people believe Murerwa’s forecasts.
His predictions came at the same time as he was admitting that his forecast last year that the economy would grow by between 1-2% had failed.
The economy declined by 2,5% in 2006 despite claims that it would grow on the back of a 23% increase in agricultural production. In 2005 the economy declined by 3,8%.
Murerwa said in his statement that the agriculture sector would grow by 9,4% due to the timely supply of inputs and prospects of good rains.
“Against this background, and also taking account of forecasts by the Meteorological Department of a near-normal rainfall season, agricultural output is expected to register a growth of 9,4% in 2007,” said Murerwa.
This year the government was forced to revise its growth target twice. Presenting the budget last year, Murerwa said the sector would grow by 28%. He later backtracked during the supplementary budget and revised the target to 23%.
Yesterday Murerwa changed the projection again saying agricultural production would increase by 9,4%.
Analysts were sceptical of his forecasts in the face of perennial shortages of inputs and tillage power.
Murerwa said the manufacturing sector would decline by 2% from the 7% last year.
Indications are however that the rate could be higher because of the continued closure of companies in the sector. This year alone more than 300 companies are reported to have closed shop due to viability problems caused by lack of raw materials and foreign currency.
More than 30 exporting companies have shutdown. Nearly 20% of companies in the bakery industry have closed down.
Analysts say the few companies that are still operating are also in danger of closing because of government policies like price controls and an unviable foreign currency regime.
Murerwa had “good news” on the inflation front, saying it would come down to levels of 350-400% by December next year. This was despite the fact that his previous target dismally failed. For instance, his projection of 230-250% by end of this year is already wide of the mark with strong indications that inflation will end the year above 1 000%.
The new target on inflation does not tally with those made in the National Economic Development Priority Programme (NEDPP) which he said the budget would support. Under NEDPP inflation was forecast to end the year between 20-30%.
Murerwa also said the mining sector would rebound from a 14% decline expected this year to register a 4,9% growth next year.