THE African Development Bank (AfDB) has projected a decrease in Zimbabwe’s projected gross domestic product (GDP) growth rate to 3.2%, between 2023 and 2024, owing to external shocks, Russia’s invasion of Ukraine and a slump in South Africa’s economy.
Zimbabwe’s economy, burdened by an unsustainable debt overhang, has elicited gloomy projections trend in comparison with previous forecasts by the International Monetary Fund (IMF) and national Treasury. With a total consolidated debt of Zimbabwe of US$17.5 billion, Zimbabwe owes international creditors US$14.04 billion, with domestic debt pegged at US$3.4 billion.
Effects of Zimbabwe’s debt has also been felt slowing down the region. For instance, while speaking at Zimbabwe’s debt dialogue in Harare last week, former Mozambican president Joachim Chissano said: “Many regional infrastructure development plans, including roads, railways and power transmission lines have been brought to a standstill, as they have to run through the country. The continental free trade is also undermined by the situation prevailing in Zimbabwe.”
Zimbabwe has been urged to look into economic and governance issues constraining arrears clearance and debt resolution.
Last year, the IMF projected a decline in GDP to about 3.5%, less than the estimated 4% announced by Finance minister Mthuli Ncube during last year’s mid-year budget announcement.
Data in AfDB’s African economic outlook for 2023 shows that Zimbabwe’s economy has struggled, trailing regional neighbours.
For instance, AfDB forecasts 6.6% GDP growth for Mozambique and a 4.1% uptick for Zambia. AfDB has forecast an increase in the Seychelles’ GDP to 4.7%, while the Democratic Republic of Congo’s GDP is projected to increase to 7.6%, the highest growth on the continent.
The bank has also predicted a decrease in southern Africa’s economy by 1.1 percentage points, from an estimated 2.7% in 2022 to 1.6% in 2023, largely owing to the continual weakness of South Africa, the region’s largest economy and trading partner.
South Africa, Sadc’s largest economy (60% of the region’s GDP) and main trading partner, recorded a 2% real GDP growth in 2022, less than half the growth rate in 2021 (4.9%), due to subdued global demand, power outages, and devastating floods that affected industrial production.
“A build-up in inflationary pressures also affected household consumption spending, a key driver of growth in South Africa. South Africa’s close trade ties with other countries in Southern Africa means that shocks buffeting the country are transmitted to the rest of the region. Countries in the Common Monetary Area and the Southern African Customs Union experience near-symmetrical shocks to those affecting South Africa.
“Protracted delays in addressing South Africa’s worsening energy crisis, coupled with operational and financial weaknesses in state-owned entities and slow progress in implementing reforms, will keep the country’s growth below emerging market peers. Growth in the region will thus remain subdued, with real output projected to decelerate to 1.6% in 2023 before rising to 2.7% in 2024,” AfDB says.
The tightening of lending conditions is projected to impact heavily on Zimbabwe, already grappling with unsustainable debt.
“Sustained tightening of global financial conditions has put pressure on African national currencies. National currencies in Africa’s net commodity exporters lost substantial value in 2022, mainly due to monetary policy tightening in the United States, which propped up the US dollar and historical domestic macro-economic imbalances.
“Zimbabwe’s dollar, Ghana’s cedi, and Sierra Leone’s leone were among Africa’s most devalued currencies against the US dollar in 2022, with respective depreciation rates of around 323.4%, 42.5%, and 34.0%,” according to the report by AfDB.
While inflation is predicted to fall between 2023 and 2024, Zimbabwe has been named amongst countries that are likely to continue on an upward trend.
“Inflation in Africa is projected to increase further to a record 15.1% in 2023 but decline to 9.5% in 2024, close to the pre-pandemic levels of 9% in 2019 and 9.7% in 2014–18.
“The projected increase in inflation in 2023 is largely attributed to prevailing structural weaknesses in most African countries — including supply chain constraints, output gaps, imported inflation — and an exchange rate pass through from the stronger US dollar, despite declining international commodity prices.
“A decline in inflation is expected in 2024 in all regions and most countries, reflecting the expected benefits from the current cycle of monetary tightening. Despite the expectations of single-digit inflation in Africa in 2024, double-digit inflation could persist in East Africa (17.7%), West Africa (11.3%) and a few countries that have a history of high inflation such as South Sudan, Sudan, and Zimbabwe,” AfDB said.