INDUSTRY’S apex body, the Confederation of Zimbabwe Industries (CZI), has warned of stunted economic growth prospects for 2022 due to poor management of inflation and currency volatility.
Although the economy is projected to grow by 5,5% in 2022, the CZI maintains inflation and currency instability will slow growth as they remain the biggest challenges to industrial performance.
Other factors like global trends and developments such as prices of commodities coupled with the war in Ukraine are expected to add the strain and worsen inflationary pressures in the country.
“The inflation trends generally underline that inflation is not yet under control in Zimbabwe.
“The major threat to Zimbabwe’s economic prospects is its inability to successfully manage currency and inflation, which are intertwined. The base effect, which made it easy for Zimbabwe to register rapid deceleration in inflation from a peak of 837.5% in July 2020 ended in July 2021 when inflation was 56.4%,” said the CZI in its Annual Economic and Business Outlook 2022 report.
Earlier this year, the CZI also warned the country would once again miss inflation targets for this year as policymakers continued to ignore fundamental issues being raised by industry.
The industrial body highlighted that the authorities were, among other things, failing to address the official foreign currency auction system that saw some bids being cleared after two months.
In his 2022 National Budget, Finance and Economic Development minister Mthuli Ncube projected an average inflation target of 32.6% and end period range of 15% to 20%.
Statistics show that inflationary pressures began to emerge beginning September 2020, which has seen annual inflation increasing from 50.2% in August 2021 to 66.1% in February 2022.
The month-on-month inflation is also registering an upward trend, increasing to a record high since August 2020.
“Given the pressures from the global developments, inflation is expected to only worsen in the outlook, unless there are new measures adopted to deal with the challenge.
“In addition to issues at the global level which are generally beyond the control of policymakers, inflation in Zimbabwe is highly correlated to the growth in money supply, especially M1.
“This generally implies that the ability of the policymakers to control the growth of money supply beyond reserve money will be critical to stopping the inflation momentum.
“While the central bank has been doing well in controlling reserve money growth, there is still need to continue with mechanisms that will stop the growth on broad money, especially coming up with financing mechanisms for infrastructure, agriculture and subsidies that do not result in rapid growth of money supply. Thus, in the outlook, inflationary pressures are expected to remain in place,” said the CZI.
Meanwhile, the industrial lobby group has also called on the government to address the country’s debt distress as it is crippling operations due to lack of access to foreign funding for retooling, procurement of raw materials and meeting foreign obligations.
Addressing delegates at a debt indaba held in Harare this week, CZI president Kurai Matsheza noted that while there are growth prospects for 2022, businesses still required external support in the form of loans to boost production.
“Without external support, which is coming in certain instances as debt, I don’t think that on our own we will be able to move very fast and efficiently in taking this country forward.
“This external support is still required. So as the business community we say let’s move with speed and resolve some of these outstanding issues,” he said.