JUST like many other research and expert organisations focussed on the current Zimbabwean situation, the United Kingdom-based Economist Intelligence Unit (EIU), which produces specialist economic analyses, has painted a grim picture of the country’s prospects.
In its latest report released yesterday, the EIU says Zimbabwe’s economy will shrink by a frightening margin — 12,9%.
“We forecast that real GDP (gross domestic product) will contract by 12,9% in 2020 (following an estimated decline of 18% in 2019), as drought continues to weigh on agricultural output and energy production from hydropower, and as the ongoing currency and liquidity crisis hampers economic activity across the country,” EIU says.
“In 2021-24 growth will steadily increase as better weather conditions facilitate growth in agriculture and a return to domestic hydropower production, allowing mining activity to pick up.
“Nevertheless, continued weakness of tobacco prices is likely to temper investment in the agricultural sector over the medium term. Industrial sectors will register firmer growth, albeit from a very low base, as monetary conditions improve later in the forecast period.
“Despite reformist rhetoric from the government, we expect limited progress in addressing structural bottlenecks and improving the poor business climate, although mining and energy infrastructure is likely to continue to attract some investment.
“There remain significant downside risks to our medium-term outlook. Rampant inflation and plummeting productivity, a protracted drought or a significant drop in commodity prices could push the economy into a prolonged recession well beyond 2020.”British think-tank Chatham House also says the situation is bad.
Now combine this with the current political crisis and the ongoing party talks charade, you are simply assured of further deterioration and a socio-economic catastrophe ahead.
President Emmerson Mnangagwa and his advisers — who are collectively evidently clueless — may be in denial, but that is the blunt reality. It is only them who do not and cannot see that reality. That is why Finance minister Mthuli Ncube in November last year forecast 3,1% growth when everyone could see the economy was in turmoil and headed for recession.
Of course, Ncube has abandoned that wishful thinking course and now admits that the “2019 GDP growth is expected to be negative”.
The International Monetary Fund has predicted the economy will contract by 5,2%; before revising the figure to 2,1% in line with its Staff Monitoring Programme for Zimbabwe. Now it seems their original forecast was more accurate after all.
The World Bank says the Zimbabwean economy is now in recession and will shrink by 3,1% in 2019.
The economy will contract this year due to drought and severe shortages of foreign currency, cash, power, water, fuel, and rampant inflation. Production keeps on plunging amid a huge drop in real wages, purchasing power and aggregate demand.
The situation is now increasingly untenable.