BY ESTHER MAPUNGWANA
THE 2009 global recession was perceived to have been one of the major recent crises in history, with GDP shirking by 1,7%. This insight has been shifted by the impact of the Covid-19 pandemic on most economies in 2020.
World Bank statistics have shown that the world gross product fell by an estimated 4,3% in 2020 — the sharpest contraction of global output since the Great Depression, out weighing the decline witnessed in 2009.
The pandemic has evidently affected both the developed economies and developing economies. Although most reports reflect that developed countries have been hit the hardest by the first wave of the virus, developing countries also felt the heat especially with the poor and limited health infrastructures in most of these countries.
As a result of the stringent lock-down measures in the developed economies, output is estimated to have shrunk by 5,6% in 2020, with growth projected to recover to 4% in 2021.
A report released by the IMF at the end of January 2021 forecasted the global economy to grow by 5,5%.
The new figure for 2021 is an upgrade from the 4% forecast by the World Bank and the 5,2% IMF forecast in October.
The new growth prospects are anchored on the back of the intake and distributions of the Covid-19 vaccine. According to the IMF, the vaccines should contain the spread of the virus and allow governments around the world to ease lock-downs and encourage a return to normal economic activity.
The IMF however indicated that there is still a need for government support to offset the damage from the pandemic and warns that Covid-19 mutations could affect the outlook for global health and economic growth.
Zimbabwe was not spared by the impact of the pandemic, which was hammering on an already fragile economy. The growth prospects of the nation have been anchored on the performance of the agriculture sector as commodity prices are set to be positive in the year. The Ministry of Finance has higher projections for the country than the International Development Agencies.
According to the Ministry of Finance and Economic Development, the Zimbabwean economy contracted by 4,5% in 2020 and is expected to grow to 7,8% in 2021. Before the pandemic, the economy was projected to grow by 3%.
The Government anchors the country’s recovery on milestones from the Transitional Stabilisation Programme (TSP) and targeting additional support measures to cushion vulnerable households..
The positive sectorial growth predictions are based on different factors. The agriculture sector is set to grow by an estimated 34% due to good rains, improved access and timely financing of agriculture, timely provision of farming inputs to vulnerable households under Pfumvudza/Intwasa model and enhanced irrigation support.
Mining and quarrying is also forecasted to grow by 2%. The manufacturing sector is estimated to grow by 7% based on increased capacity utilisation, which can be questionable considering the existing and anticipated lock-down restrictions. Electricity is forecasted to grow by 13,9% grounded on heavy infrastructure capital injection, which the government has pledged to put in. The construction sector is set to grow by 7,7% and the distribution sector by 5,1%.
According to the African Development Bank, recovery in the agriculture, mining, and tourism sectors will be backed by increased public and private investments. The regeneration of civil society and engagement with political actors in a positive social contract will accelerate reforms.
Vast natural resources, fairly good public infrastructure, and a skilled labour force give Zimbabwe an opportunity to join supply chains in Africa and increase trade in the African Continental Free Trade Area.
In addition to the uncertainty caused by the third wave of Covid-19, high and unsustainable debt, high fiscal deficits, cash shortages, limited foreign exchange, and persistent shortages of essential goods may hinder significant economic recovery. The country is still inhibited in development spending and social service provision, which are vital sectors for growth.
The government through the five-year National Development Strategy 1 aims to create a conducive environment for growth, and the strategy should address the underlining issues affecting smooth business and economic activity in the country.
Through the NDS1 the government aims to maintain fiscal deficits averaging not more than 3% of GDP in line with Sadc targets; achieve and maintain single digit inflation; increase international reserves to at least six months import cover by 2025; establish a market determined and competitive foreign exchange rate regime; maintain public and publicly guaranteed external and domestic debt to GDP at below 70% of GDP; maintain a current account balance of not more than -3% of GDP; improve infrastructure development and investment in energy, water, sanitation, roads, health, education, housing and social amenities; and accelerate value addition and beneficiation of agriculture and mining production among other objectives.
Currently the country has been experiencing a spike in infections, which has seen the strict enforcement of the lock-down measures hence constrained business activities especially in the small to medium enterprises and the informal sector resulting in reduced demand.
Despite the critical need for economic growth, saving lives and protecting livelihoods must remain the priority in this pandemic era, with increased health spending and financial support to vulnerable groups.
When and if the pandemic has receded, emphasis should be placed on stimulating economic activities.
According to the World Bank and IMF, the recovery in the different countries faces downside risks, with the outlook being subject to high uncertainties over the progression of the pandemic at the local and global levels and the response of the people to the vaccine, including its accessibility.
New surges of the virus could force countries to reinstate lock-downs and other restrictive measures, which may modify the projections.
Hence it becomes imperative for analysts and government advisers to closely asses the recovery path so as to introduce relevant policy actions when needed.
Mapungwana is an economist and industrialist and can be contacted on firstname.lastname@example.org.