Connect with us

Support The NewsHawks

Economy

Economic fortunes depend on policy implementation

Published

on

THE continuing economic challenges, com[1]pounded by the adverse effects of the Covid-19 pandemic, are likely to derail growth projections for the year 2022, analysts have said.

ALEX MHANDU

Gross Domestic Product (GDP) growth for the year 2021 is estimated to remain strong at 7.8%, while it is projected to grow by 5.5% for year 2022 on the back of an anticipated strong agriculture and mining performance.

 The International Monetary Fund’s World Economic Outlook report of October 2021 projects the global economy to have grown by an average of 5.9% in 2021.

 However, for Zimbabwe, the pandemic came at a time the economy was already facing several headwinds such as limited foreign currency, inflationary pressures and unreliable utilities that derailed production.

 Climate-induced disasters have also added to the troubles, which experts see as a threat to meeting the projected growth targets, with fiscal policy implementation put to the test.

“The year 2022 is going to be a major test for the fiscal policy implementation due to the continuing Covid-19 situation and inconsistent rainfall patterns which have been experienced in the first half of the rainy season.

 “The accumulating problems are likely to de[1]rail the 5.5% GDP growth rate projections for the coming year,” stockbrokers EFE Securities said in a full-year 2021 Review and 2022 Outlook report.

The country also faces currency volatility, dating back as far as 1997, which has created bottle[1]necks for economic growth, despite several efforts to tame the challenges and boost production. To date, foreign currency shortages have continued, causing a spike in the parallel market rate.

 This has resulted in severe exchange rate disparity between the parallel market rate and the official auction rate. As of last week, the greenback was selling at a premium of around ZW$230 on the parallel market against the official auction rate of ZW$109.

However, the monetary authorities have mulled some measures to address the challenge, while the stockbrokers maintain increasing liquidity on the official market may be an added advantage to address the challenge.

“The monetary policy committee has resolved to continue with its tight monetary policy stance in the coming year while the fiscal authorities will also support the measure through the curbing of malpractices in the financial sector in a quest to mitigate the disparity between the official exchange rate and the parallel market rate.

“Availing of funds in the official sector can be a major win to the corporate sector as they have been citing operational challenges due to short[1]ages of foreign currency to import raw materials,” EFE Securities said.

The stockbrokers also see hope in the ongoing vaccination programme, which is expected to see more companies able to operate as compared to the previous year.

 Already, some listed firms have recorded improvements in performance for the financial year 2021, a trend expected to continue in 2022, with blue chips seen keeping their heads above the water.

For Delta, which is currently the biggest company on the Zimbabwe Stock Exchange by market capitalisation, its recent acquisitions of South African United Breweries will further help consolidate its position in the sorghum beer segment, which is a major volume driver for the group.

Elsewhere, Econet continues to enjoy increased demand for data, as the country implements various levels of Covid-19 lockdowns, forcing businesses to adopt remote working while schools have also embraced e-learning.

Seed Co Limited, on the other hand, is expected to continue benefiting from increased seed demand as agriculture remains a strong pillar of African economies.

The group reported maize seed sales volumes rose 46% for the half year to 30 September 2021, as half-year revenue jumped 43% compared to the corresponding period in the prior year

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *


Advertisement

Popular