THE International Monetary Fund (IMF) has cut Zimbabwe’s economic growth prospect for 2021 to 3.1% from an initial projection of 4.1% due to the impact of Covid-19, the multilateral lender said in its latest outlook report.
The country is expected to recover from two successive years of contraction and register growth on the backdrop of sustained price stability.
According to the IMF’s report titled World Economic Outlook: Managing Divergent Recoveries, which was released this week, while the global economy is expected to register growth following the rollout of Covid-19 vaccines, potential threats posed by new strains of the virus and other exogenous factors would retard this growth.
The divergent recovery paths, the IMF says, are likely to create significantly wider gaps in living standards between developing countries and others, compared to pre-pandemic expectations.
“We are now projecting a stronger recovery in 2021 and 2022 for the global economy compared to our previous forecast, with growth projected to be 6 percent in 2021 and 4.4 percent in 2022. Nonetheless, the outlook presents daunting challenges related to divergences in the speed of recovery both across and within countries and the potential for persistent economic damage from the crisis,” the IMF says.
While Zimbabwe was already in recession before the Covid-19 pandemic, with the economy contracting by 6% in 2019, the global pandemic worsened the situation as the economy slumped by 10% in 2020. In its economic outlook, the African Development Bank (AfDB) last month said Zimbabwe will also see 3.2% gross domestic product growth in 2022.
Zimbabwe will pin its hopes on sustained stability in the country’s banking system, which has increased capacity of credit and an improved agricultural season characterised by normal to above normal rains.
However, AfDB said recovery will continue to be blighted by the pandemic whose end seems out of sight amid growing concerns of a third wave.
“Modest economic recovery is projected in 2021, if effective measures are taken to stabilise foreign exchange and avoid excessive money creation. But the outlook is clouded by a number of factors,” AfDB says, urging the government to ease border closures.
“The pandemic and government policies to contain the (Covid-19) disease will affect production levels across all sectors although a partial easing of border closures may help.”
The continental bank warned that the industrial and mining sectors were faced with reduced competitiveness, low commodity prices and power shortages.
“The problems are exacerbated by debt distress and arrears and low international reserves that can cover less than one month of imports,” AfDB says.
Zimbabwe has been buckling under a debilitating debt overhang, weakening the government’s capacity to attract fresh capital.
Zimbabwe’s economy continues to be blighted by poverty which stood at 70.5% in 2019.
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