RESERVE Bank of Zimbabwe (RBZ) governor John Mangudya this week defended Zimbabwe’s bullish economic outlook after the World Bank projected a conservative estimate citing the effects of the Covid-19 pandemic and slowdown in economic activity in the region.
The country is this year expected to recover from two successive years of contraction on account of improved agricultural output.
Mangudya, one of the delegates attending the launch of the latest World Bank economic update on Zimbabwe, maintained that the country would this year register 7.4% growth.
In its latest report on Zimbabwe the World Bank however said Zimbabwe would record modest 3.9% growth this year before rising to 5.1% and 5% next year and in 2023.
Responding to findings of the report, Mangudya questioned the World Bank’s model used in making key economic projections and argued that Zimbabwe, which in 2019 had the second-highest inflation rate in the world after Venezuela, would tame inflation by year-end.
“We are comforted that they (the presentations) all show a positive trajectory from economic growth. Whilst you are anticipating a 3.9% in 2021, we are on 7.4% and above, but as was said by the presenter we are on the same direction, so the direction is all positive,” Mangudya said.
“In terms of poverty alleviation, the vulnerability has been going down. So obviously it’s a question of the magnitude. Just two issues that I thought I might bring to the attention of the presenters — on macro economy especially. In terms of inflation, the 86% that the World Bank projected is quite out of our projections because, as these numbers show, in May we were on 162%. We expect June inflation of 105% and July to be 55% and below.”
“Why? Because of the base effect. Our highest inflation was 837% in July 2020 and because of the base effect, to suggest that we are going to be at 86% by end of the year is a bit out of projections. So you might wish to consider the numbers especially if you talk of July being the highest inflation last year. I am not very sure what model you used as World Bank but it might be necessary to look at that figure. We do believe that by end of the year, our year-on-year inflation will be between 15 and 22%.”
In its economic update, the World Bank said Zimbabwe, which registered two years of decline, would recover this year.
“After two difficult years, Zimbabwe’s economy is heading towards a recovery amid high uncertainty on the likely strength of recovery and the extent of downside risks on both the global and local level.
“Growth of GDP is projected to reach 3.9 percent in 2021, a significant improvement compared to 2020, led by a recovery in agriculture, as well as improved electricity generation from replenished hydroelectric reservoirs, and slower than expected inflation,” the World said in its report.
“In the near term, however, global and local outlooks remain uncertain and pose significant downside risks. A prolonged pandemic, weaker global demand, and heightened macroeconomic instability could choke economic growth, increase poverty, and worsen human capital development outcomes. The best case scenario is linked to acceleration of economic reforms and reengagement with international development partners with growth expected to reach four to five percent in 2021, inflation returning to single digits in 2022, and poverty reduction accelerating.”
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