Caution vs optimism: Mthuli sticks to 7.4% growth, despite ED saying Zim must cut 2021 forecast

ED more cautious on recovery than Fin. Min Mthuli Ncube

Finance Minister Mthuli Ncube is sticking to his economic growth forecast of 7.4% for the year, just days after President Emmerson Mnangagwa said Zimbabwe will have to lower the projection.

Ncube said on Tuesday that he believes that his estimate is “achievable”, basing his optimism on the expected recovery in agriculture.

“Zimbabwe is coming through this recovery phase quite well,” Ncube told Bloomberg TV. “Mining remains strong. Our infrastructure investment program is also quite strong. There’s really a recovery across the board, except the tourism sector.”

Ncube’s optimism is contrary to a more cautious outlook given by Mnangagwa in an interview that aired on Saturday night. Mnangagwa said the 7.4% projection had not accounted for new waves of COVID-19.

“But now, with the pandemic, which affects economic activity, you cannot stick to that. We have to revise,” Mnangagwa said. He, however, said he still sees recovery.

“Things will continuously change depending on the concrete facts on the ground. But, at the end of the day, we are very sure that there is a rebound, because we have corrected the fundamental issues which affect the economy.”

The IMF, in its latest Africa economic outlook report, also revised its Zimbabwe economic growth target for this year from 4.2% to 3.1%. The Fund also projected that inflation will end the year at 49.4%, much higher than the 3% that it projected in its last forecast, and more than government’s own year-end target of below 10%.

At a press conference last Thursday, IMF’s Africa Director, Abebe Aemro Selassie said recovery in Zimbabwe would be slower than initially expected because of COVID-19 and the country’s inability to access foreign credit.

In the Bloomberg TV interview, Ncube defended the foreign currency management system, despite a wide gap between the formal exchange rate and the black market rate. The formal exchange rate of Z$84.5 at the last auction is 36% firmer than the informal market rate. Ncube however insisted that the gap is “within global norms,” and that it has been far higher before. “It used to be as high as 300%,” he said.