Zim GDP to shrink -4,8% ­ IMF

THE International Monetary Fund (IMF) has predicted that the country’s gross domestic product (GDP) will next year shrink by minus 4,8% rather than the minus 7,1% it forecast in June this year.



, Arial, Helvetica, sans-serif”>Finance minister Herbert Murerwa last week announced that the economy would grow next year for the first time since 1999 on the back of a major turnaround in the troubled agricultural sector.


Murerwa forecast gross domestic product growth of between 2 to -3,5% in 2006, against a 3,5% contraction this year.


This decline is in sharp contrast to the projected growth of 4,3% to 4,8% for the world economy and sub-Saharan Africa respectively.


Murerwa said agriculture, which has been on a slide for the past six years, would grow by 14,8%.


He said the key drivers of this growth would be maize production which he said would increase by 33% and cotton by 26%.


He said the mining sector would also contribute to economic growth with an increase of 27%.


“Growth will be driven mainly by agriculture, manufacturing, mining and tourism,” Murerwa said.


Analysts however said Murerwa’s optimism was not backed by facts on the ground, where production is likely to be compromised by the shortage of essential inputs such as fuel, chemicals, and fertilisers, among others.


The IMF forecast the consumer price index at 253,1%.


The country has suffered six years of recession, with output contracting by more than a third.


A combination of foreign currency shortages and drought has forced the manufacturing sector to operate well below capacity.


Murerwa predicted the budget deficit would dip to 4,6% of GDP in 2006 from 5% this year.


He, however, gave no explanation for the lower forecasts, but has warned government departments against overspending.


The IMF said without decisive policy action, the outlook for 2006 and beyond was bleak. The IMF predicted further difficulties in agriculture. It said the current maize crop was unlikely to meet national requirements.


It also projected higher inflation and foreign currency shortages. “The widening fiscal deficit and quasi-fiscal activities will contribute to money growth, pushing inflation to about 320% by end-2005,” the IMF said.


“The current account deficit will widen temporarily to 7½% of GDP due to higher food imports. Output is projected to contract again in 2006, with a less severe decline in agriculture assuming normal levels of rainfall.”


It said inflation would decelerate to 200% by the end of next year as the fiscal deficit was held back by the erosion of government expenditure in real terms. – Staff Writer.