Zimbabwe’s economy will expand by 3.1% this year from the 7.4% earlier projected by the Ministry of Finance and Economic Development as it has been hit by the effects of Covid-19, subdued performance from minerals and limited financial reserves, financial analysts have projected.
In its Zimbabwe 2021 Economic Outlook report, Morgan & Co said the resurgence of Covid-19 which has seen most companies closing and trading limited time will see the country’s economy contracting.
“We expect a 3.1 Gross Domestic Product in 2021 and a 5% growth in 2022.
“Overally, the Covid-19 pandemic presents hurdles associated with deteriorating disposable incomes that can translate to limited aggregate demand in 2021. Companies that focus on luxury or non-essential goods will be victims,” Morgan & Co said.
The research also revealed that limited social safety nets, commodity driven economy and limited financial reserve could further affect the economy.
“Limited economic activity and productive levels associated with restrictions has created company closures, increased levels of formal unemployment and shrinkages of value of export receipts,” it said.
The coming in of the new Covid-19 variant from South Africa will affect the country’s trade with its biggest trading partner causing reduced foreign currency inflows.
Diaspora remittances will also be affected as countries tighten lockdown restrictions to combat the spread of the pandemic.
Morgan &Co said the emergence of successive cyclones this year could affect agriculture production and cause the government to spend more on food imports.
The report posited that hyperinflationary environment could trigger some industrial actions as the disposable income continues to shrink against the prices of basic commodities.
Financial experts indicated that the government could incur some unplanned expenditures as the country draws nearer to elections.
Meanwhile, the International Monetary Fund said sub-Saharan Africa is contending with an unprecedented health and economic crisis — one that, in just a few months, has jeopardised years of hard-won development gains and upended the lives and livelihoods of millions.
Economic analyst Victor Bhoroma recently said key risks in 2021 included floods.
“Furthermore unresolved economic constraints abound such as high levels of public debt (over 80% of GDP), liquidity challenges in the market, hostile investment climate characterised by difficulties in repatriating foreign dividends and heavy tax burden, bureaucracy and systemic corruption in government,” Bhoroma said.
“Command policies that suppress free market pricing and crowd out private sector investment, weak institutions (flawed rule of law, guarantees to property rights, land tenure and governance culture), underperforming state entities and smuggling of precious minerals that cost the country billions in tax revenue could affect the country’s economic growth.”
He said these economic challenges have persisted largely as the government is skirting on the painful structural reforms and policy implementation needed to overhaul the country’s economy.
Zimbabwe lost over US$800m in foreign currency earnings from international tourism due to global travel restrictions and shutdown in light of Covid-19 restrictions from March to September 2020.
Despite the resumption of flights and opening of some areas, Morgan & Co does not expect much from the tourism sector.
“Tourism and hospitality will likely remain in doldrums due to the pandemic which restricts international travelling,” it said.