GROWTH projections made by Finance minister Mthuli Ncube in the 2021 national budget will be difficult to achieve this year, leading economists have said, citing fresh headwinds stemming out of Covid-19 induced lockdowns.
While debating 2021 economic dynamics during last week’s edition of the Big Debate Series, titled Zimbabwe 2021 Economic Prospects, experts said apart from lockdowns, the pandemic would have far-reaching implications on consumption levels.
The debate is hosted by Alpha Media Holdings.
The Treasury boss had projected a 7,4% gross domestic product (GDP) growth this year, up from a 4,1% contraction, with year-on-year inflation targeted to fall to 135%, from 336% at the end of 2020.
Back in December, prospects for growth were brighter than now.
The National Development Strategy-1 had been launched and there were prospects for a good agricultural season.
But in the past month, a second wave of the pandemic has turned the economy upside down, amid high mortality rates and a lockdown. CEO Africa Round Table chief executive officer Kipson Gundani said despite positive prospects in mining and agriculture, a serious downside risk exists on the consumption side due to the pandemic and lockdowns.
“Most entities that rely on domestic driven consumption will suffer a huge knock in 2021,” he said.
At best, said Gundani, Zimbabwe’s economy will only grow by 3%, which is less than half of official projections.
Gundani said inflation targets will also be difficult to achieve, while exchange rate policies could lead to “some point of explosion”.
His views were shared by Institute of Chartered Accountants of Zimbabwe (ICAZ) CEO, Gloria Zaravanhu, who said even a 3% growth may be a toll order, given the depressed demand, limited budgetary support, water and power shortages.
She said tax revenues will be affected by a growing cash economy that is largely dealing in foreign and promotes tax evasion.
Zvaravanhu said to pull through the difficult period, Zimbabwe must manage its foreign debt and arrears, adhere to International Monetary Fund guidelines and unlock fresh funding from international financial institutions.
She warned that Covid-19 would have a huge impact on the economy, with corporates missing reporting deadlines due to restrictions on movement of people.
Zimbabwe Economic Society president Nigel Chanakira said coming from a negative 4% growth performance in 2020, the Zimbabwean economy was likely to grow by between 2% and 3%.
Chanakira also said Covid-19 will be a major problem to economic performance with January already gone and indications that meaningful activity across the economy can only be in the second quarter of the year.
Market analyst, Ranga Makwata has projected that inflation will rise this year.
“Inflation, which had been hitherto controlled is likely to start trending up again as a result of the exchange rate pass through effect, Makwata argued.