Own Correspondent|UNITED Kingdom-based global economic research firm, Fitch Solutions, says Zimbabwe possesses all human and natural factors for robust growth and development, although factors of weak governance by the ruling ZANU PF party will block the possible growth.
Fitch said rolling electricity outages and sporadic fuel supply which are a direct factor of ZANU PF’s weak governance are among the major constraints that will continue to weigh heavily on businesses resulting in reduced competitiveness of local products on domestic and international markets.
According Fitch Solutions’ latest report on Zimbabwe, the country’s operating environment will remain challenging over the short-to-medium term, as it remains vulnerable to factors such as adverse weather conditions, commodity price shocks, low industrial productivity and acute foreign currency shortages.
Fitch also cited issues around Zimbabwe’s reliance on the primary exports sector, high import demand, widespread corruption, concerns around property rights protection, high borrowing costs and a yawning infrastructure deficit among factors that will compound the situation for businesses in Zimbabwe.
The global economic and risk research entity said businesses operating in the country will face electricity outages as well as fuel shortages, necessitating the use of alternative power sources at an added cost.
“These factors combined with volatile foreign currency availability, high inflation for inputs and rigid labour market regulations significantly lower the country’s competitiveness relative to its Southern African neighbours such as Namibia, Botswana and South Africa,” Fitch Solutions said.
But Fitch noted that the bumpy economic terrain has significant human capital and vast resource potential which could drive economic development.
“The latter is intrinsically tied to improved governance and transparency, increased investment openness, and meaningful re-engagement with multilateral lenders and the international community in the years ahead,” Fitch said.
Zimbabwe’s real gross domestic product is expected to contract in 2019.
Production of major minerals like gold, diamond and coal fell by more than 27 percent while production of maize, the main staple food, was less than half of its level in 2018, resulting in wide-spread food insecurity.
“In the absence of international support, Zimbabwe macroeconomic challenges may persist.
“With dwindling reserves, there is a high-risk of the exchange rate overshooting, contributing to inflationary pressures.
The World Bank recently raised similar concerns indicating that social and political pressures on ZANU PF will make them fail to revive the economy.
“Climate related risks may constrain recovery of the agriculture sector in the medium-term exacerbating food insecurity.
“Social and political pressures could lead to policy slippage, delay in macroeconomic stabilisation and political reforms,” the World Bank said.