The World Bank has painted a slightly optimistic picture in respect of Zimbabwe’s Gross Domestic Product (GDP), projecting a 3.7% growth this year. This is higher than the 3.1% GDP growth projection pronounced in the 2019 National Budget by Finance and Economic Development Minister Mthuli Ncube, in November last year. According to the World Bank’s Global Economic Prospects report titled “Darkening Skies”, which was released yesterday, the Zimbabwean economy will also grow by 4.0% next year, as well as in 2021. In June, the World Bank had put Zimbabwe’s growth projections at 3.8%. The Bretton-Woods institution’s 2019 forecast for Zimbabwe, also exceeds the projected growth estimate for SubSaharan Africa, which has been put at 3.4% “The recovery in Sub-Saharan Africa continues, albeit at a softer pace.
Growth in the region is estimated at 2,7% in 2018, significantly slower than expected, partly due to weaknesses in Angola, Nigeria, and South Africa. Growth is foreseen to rise to 3,4% in 2019 and 3,7% in 2020-21, as reduced policy uncertainty helps support a cyclical rebound in these large economies.
However, per capita income growth will remain modest, and progress in poverty reduction limited. Risks to the outlook are tilted to the downside.
Key external risks include an unexpectedly sharp decline in commodity prices, an abrupt tightening of global financial conditions, and escalating trade tensions involving major economies.
Domestic risks pertain to fiscal slippage, political uncertainty, domestic conflicts, and adverse weather conditions,” said World Bank Chief Executive Officer Kristalina Georgieva.
At the broader level, global growth for 2019 has been projected to weaken 2,9% down from the previously forecasted 3% as US and China trade tensions mount. “Global economic growth is projected to soften from a downwardly revised 3% in 2018 to 2,9% in 2019 amid rising downside risks to the outlook, International trade and manufacturing activity have softened, trade tensions remain elevated, and some large emerging markets have experienced substantial financial market pressures,” the World Bank said on Tuesday.
The report also noted that, SubSaharan African metals producers would likely be among the hardest hit by escalating trade tensions between China and the United States, as metals prices would fall faster than other commodity prices as a result of weakening demand from China, this will be coupled with pressures associated with heavy borrowings which most SubSaharan countries make at high interest rates.
“The increased reliance on foreign currency borrowing has heightened refinancing and interest rate risk in debtor countries. Furthermore, the rise in non-resident participation in domestic debt markets has exposed some countries to the risk of sudden capital outflows. In some countries, sizable loans to state-owned enterprises, backed by commodity exports, have increased the risk that a negative commodity price shock could trigger financial crises.”
Meanwhile, Zimbabwe is facing growing economic woes, which have seen the escalation of fuel shortages, sharp increases in basic commodities prices and low foreign direct investment (FDI) inflows over the past years.
Money supply and inflation growth have increased pressure on local currency.
Zimbabwe companies have asked government review to the fixed exchange rate, which is causing price distortions.
Government has responded by announcing a foreign currency allocation committee to facilitate the optimum distribution of the scarce resource
