HomeBusiness DigestGDP seen shrinking further 5%

GDP seen shrinking further 5%

Shakeman Mugari

RESERVE Bank of Zimbabwe governor Gideon Gono has said recovery prospects remain grim with predictions that the economy will this year shrink by a further 5%.

ace=”Verdana, Arial, Helvetica, sans-serif”>Gono said gross domestic product (GDP), the sum total of what the country can produce, would this year decline by 5%.

GDP is one of the key components of measuring the country’s economic performance.

Presenting his second monetary policy review, Gono said the fall in GDP was a result of carry-over effects of last year.

“Overall GDP, which shrank by an estimated minus 9% in 2003, is expected to decelerate by a further minus 5% in 2004,” said Gono.

He said the continued decline in the economy was due to “structural rigidities experienced over the 12 months to December last year”.

Last year GDP slowed by minus 9% owing to government’s fiscal indiscipline, chaos in the land reform and poor policy structures.

Zimbabwe is in its fifth year of economic recession, which was sparked by the violent seizure of commercial farms that started in 2000.

Over the past four years tobacco production has declined by more than 72%.

Maize production has also decreased by 72% while cotton had slumped by 95%, according to the Commercial Farmers Union (CFU).

Manufacturing has declined by more than 35% during the same period.

Gono, however, remained optimistic that GDP would return to positive figures next year because of the combined effects of the concessionary financing facility and the increased foreign currency availability.

He said the rapid decline of inflation and improved confidence in the productive sector would help boost the economy.

However, there were doubts among some economic commentators who said the economic decline was only slowing, not reversing.

“We estimate that the economy will decline by 8% instead of the 5% that Gono is predicting,” said economist John Robertson.

“Even for next year to record a positive GDP we have to do a lot more things. It will be almost impossible for the country to record positive GDP if we don’t look seriously at the foreign currency issue.”

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