IMF trims Zimbabwe’s 2021 growth forecast to 5.1%

IMF sees 5.1% growth, but inflation weighs (pic: Desmond Kwande/AFP)

The International Monetary Fund (IMF) says the Zimbabwe economy will grow 5.1% in 2021, a slower recovery than the 6% it had forecast in June.

Inflation in Zimbabwe will average 92.5% this year and end the year at 41%, the IMF says in its latest world economic outlook. This is broadly in line with projections by the Reserve Bank of Zimbabwe, which downgraded its inflation forecast to between 35-53% for year-end, up from 25-35% previously.

Finance Minister Mthuli Ncube has set a growth target of 7.8%, banking on “rainfall season, higher international commodity prices, stable macroeconomic environment and a managed COVID-19 pandemic.” Ncube believes the recovery would be carried by agriculture, which he says will expand by 34%, higher than the initially predicted 11%.

Ncube expects more growth of 5.4% next year, but the IMF sees only sluggish growth of 3.1% in 2022.

The World Bank has forecast the Zimbabwe economy to recover by 3.9% this year.

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The IMF says Zimbabwe will record a 4.9% current account surplus this year.

Currency crisis weighs on growth chances

Exchange rate weakness is the biggest factor now undermining Ncube’s already ambitious growth targets.

Earlier this month, the RBZ said it had revised its inflation targets to reflect increased Zimbabwe dollar weakness on the parallel market and global trends.  

“Worrisomely, developments on the parallel market for foreign exchange are likely to exert further inflationary pressures in the economy,” RBZ governor John Mangudya said in an update on the economy. “In addition, the increase in international food and oil prices, as well as global inflation, continue to exert additional pressures in the domestic economy.”

The Confederation of Zimbabwe Industries (CZI), which represents the country’s biggest companies, has warned that the local currency is “in peril” due to the RBZ’s mishandling of the exchange rate. This, CZI said, was hurting the recovery that its members had noted in the economy.

“The economy is clearly in recovery, many businesses are recording growth and initiating expansion projects as noted in our quarterly surveys,” says CZI. “The strong rebound in economic activity is now threatened by the unfolding instability in the currency market.”

Globally, the IMF has lowered its growth forecast, citing the supply crisis and rising inflation. In the region, South Africa is forecast to grow 5%, Tanzania by 4%, Mozambique 2.5%, and Zambia 1%. Botswana will grow the fastest in sub-Saharan Africa at a projected 9.2%.