THE brokerage unit of insurance giant Old Mutual says while Zimbabwe’s economy has a silver lining, heightened political tension in the run-up to the next general elections may reverse economic gains.
The International Monetary Fund (IMF) sees Zimbabwe’s economy growing by a modest 2.5% against a new government estimate of 6%.
A recovery of the agricultural sector and strong mining industry output are this year seen as key drivers for the country’s gross domestic product growth.
“We expect gradual recovery in economic activity as the impacts of the Covid-19 pandemic and the Russia-Ukraine war wane,” Old Mutual Securities says in its first-quarter report.
“With the harmonised elections in 2023, the Zimbabwean economy has been showing signs of positive business growth. However, potential increases in political economic risks given the elections may become a threat to growth in the near term.”
Zimbabwe has a history of disputed elections outcomes which has offered triggered a wave of politically-motivated violence.
Apart from the political risk, experts say high levels of inflation, a weakening domestic currency, high unemployment, huge debt overhang and, most recently, an energy crisis will weigh down on economic growth.
Government projections indicate that the agricultural sector performed way above its performance for the 2021/22 season.
Growth in the hectarage cultivated and above-average rainfall received resulted in better output, particularly for maize. Other commercial crops are expected to fare better due to wetter conditions experienced during the 2022/23 cropping season.
As at 31 March 2023, tobacco sales amounted to US$149 million against sales of US$141 million in the comparable period last year. On the macro-economic front, year-on-year inflation for the country dropped to 87.6% as at March 2023 from 105.5% at end of December 2022.
“The efforts put by both the Ministry of Finance and the Reserve Bank of Zimbabwe (RBZ) to maintain price stability had resulted in a near convergence of the official exchange rate and the parallel market exchange rate by the end of Q4 2022,” the report reads.
“However, the premium between the official exchange rate and the parallel market exchange rate widened during Q1 2023 to approximately 60% heightening inflation risks. The local currency depreciated by 27.69% on the RBZ Auction market during the first quarter of the year.”