With Zimbabwe’s economy expected to shrink by 7,2% this year, buffeted by severe headwinds, including rising inflation, currency and exchange rate volatility, massive power outages and widespread company closures, Finance minister Mthuli Ncube (pictured)’s projection that the economy will rebound next year and register 4,6% growth rate is not realistic, analysts say.
A fortnight ago, Ncube, battling to contain economic implosion that has plunged Zimbabwe into hyperinflation, a decade after the country experienced another bout of hyperinflation, projected that the economy would register positive growth next year on the back of currency and price stability.
The gross domestic product projection, contained in the 2020 Pre-Budget Strategy Paper, is anchored on impressive growth that Ncube anticipates will be registered across various productive sectors of the economy, with agriculture expected to grow 10,3% next year from -16,3% this year.
However, former finance minister Tendai Biti contends that with weather forecasts pointing that Zimbabwe will experience yet another lean rainfall season next year, agricultural growth would remain depressed, worsening Zimbabwe’s economic crisis.
“A projected growth of 4% is just hope and prophesy. But economics is not prophecy. We already know that we are going to have an indifferent rainy season. So there is not going to be any meaningful production in agriculture. We already know the political situation will remain sharp and divided so there is not going to be foreign direct investment (FDI),” Biti said.
“We already know the how the monetary situation is; you do not need to be a rocket scientist to know that inflation will be at 1 000% by the end of this year. We all know the United States dollar will reach 1:150 very soon.
“But we also know they (government) are not capable of reform. Command Agriculture, which has been the basis of looting, is not going anywhere; fuel cartels are not going anywhere. The Reserve Bank quasi-fiscal activities are not going anywhere. So a realistic growth projection for 2020 is -14%. The problem with Mthuli Ncube is that he has become captured and now he is an oligarchy serving the interests of the cartels.”
Biti said growth can only happen if there are credible underlying assumptions.
The former finance minister said the underlying assumptions in the budget strategy paper were however “hogwash”.
Ncube also forecasts that next year’s growth will be driven by “improved foreign currency availability and macro-fiscal stability and business confidence” among other factors. Agriculture is expected to be a major contributor.
Economist John Robertson told the Zimbabwe Independent this week that next season’s summer cropping season would be derailed by inadequate inputs, among a myriad of challenges.
“There is nothing to show for the growth. Farmers should be getting ready to plant but there are no inputs and there is no money. On the other side, though, there is command agriculture, which is however not properly organised. So agriculture is going to be disappointing,” Robertson said.
“The tobacco season was bad. Farmers have had to cut back on the seed and the crop was affected by frost. If they repeat the same pricing as this year it means there will be nothing from it. Wheat production has also been affected by electricity cuts.
“Manufacturing has also been affected by the electricity. And the Kariba Dam is going to start filling up mid-year so the situation is not encouraging. Indications are for a negative growth of -8% and maybe positive growth will be at the start of 2021. Government plans are not working and are shallow. There are a lot of claims that should be challenged in that budget strategy paper. The IMF is not even going to be impressed by the budget strategy paper,” Robertson said.
Treasury also projects the anticipated growth next year to be propelled by the mining sector, which is forecast to grow by 10,35% next year, carrying over a 7,7% growth margin in 2021,riding on government’s ambitious plans to achieve US$12 billion in mineral shipment receipts annually by 2023.
Inspite of the massive rolling power cuts, water shortages and the crippling foreign currency crisis, among other factors, which have disrupted industrial operations, Ncube further projects that the manufacturing sector will register marginal growth of 0,8% in 2020,and 9,4%(2021) though it will contract -4,3% by year-end.
The energy sector, reeling under severe power outages which have ground industrial operations to a halt, is also expected to rebound in 2020, posting a 8,7% growth rate and 11,7% next year. It will end the year at -19,8% .
The Treasury chief also forecasts next year’s GDP growth rate to be driven by the hotel industry, registering a 5,3% growth margin, after contracting 9% this year.
Month-on-month inflation, which is hovering around 10%, is projected by Treasury to retreat next year, stabilising at 2,3% contained by a range of “fiscal and monetary policy reforms and other structural policies.”
Mthuli Though the southern African country suspended publication of annualised inflation figures, the International Monetary Fund estimates that inflation, hovering above 300%, has choked Zimbabwe’s fragile economy.