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Zim trade deficit narrows


Trade deficit projected to widen in 2022



ZIMBABWE’S trade deficit is seen widening in 2022 to 2.4% of gross domestic product (GDP) as imports continue to outstrip exports while the current account surplus could narrow further, to 1.5%.


An international research firm, Fitch Solutions, in its Africa Monitor report said demand for consumer and capital imports will remain solid as inflation slows, thus supporting spending power, and construction activity rises as the government invests in infrastructure.

“We expect the current account surplus to narrow further, to 1.5%, in 2022. We expect the trade deficit to widen to 2.4% of GDP as imports continue to outstrip exports. Our Oil and Gas team expects the average price of Brent to rise to US$72.0/bbl in 2022, while a ban on grain imports introduced in 2021 because of a substantial maize harvest is likely to be lifted, since Zimbabwe does not tend to experience consecutive above-average harvests,” said Fitch.

“Demand for consumer and capital imports will remain solid as inflation slows further (we forecast annual average inflation of 42.5%), thus supporting spending power, and construction activity rises as the government invests in infrastructure (our Infrastructure team expects the construction industry to expand by 2.8%).”

Zimbabwe’s main mineral export, gold, is also seen falling by 4.5% to US$1 700.0/oz (thousand ounces) in 2022, while the price of coal will decline by 9.1% and that of platinum is expected to stay flat, although this will be partially offset by substantial price increases for lithium. 

Fitch expects imports to rise by 5.4% and exports by 3.5% with deficits on the services and primary income accounts widening in 2022. 

Although service sector earnings are expected to be constrained by the continued weakness of the tourism sector, tourist arrivals are expected to rise by 68.6% in 2022, as the vaccine rollout progresses and economic conditions begin to normalise further.

“The total number of visitors will be barely half the level seen in 2019, and we do not expect total tourism arrivals to return to 2019 levels until 2024. Meanwhile, profit remittances by mining companies will rise, reflecting continued growth in mining output and – we expect – fewer restrictions on retention of profits, thus keeping the primary income account in deficit,” said Fitch.

“The secondary income account will remain in substantial surplus given large aid inflows and solid remittances. Although we expect growth in remittances to moderate in 2022 – as global economic activity slows, and as the lifting of lockdown measures enables members of the diaspora, notably in South Africa, to return to the use of unofficial channels (including drivers of and passengers on buses and trucks) to send money home – they will remain substantial, and we expect the secondary income surplus to rise by 2.4% in 2022.”

According to the Reserve Bank of Zimbabwe, current transfers from the diaspora and non-governmental organisations totalled US$1.7 billion in January-September 2021, 45.0% up on the year-earlier period.

As the current account surplus is seen returning to deficit from 2024, this is expected to lead to potential financing challenges given limited inflows of foreign direct investment (FDI) and low levels of foreign reserves. 

According to the United Nations Conference on Trade and Development, FDI inflows fell to US$194 million in 2020, from US$280 million in 2019.

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