Zimbabwe’s economy will contract by 7.1% this year, according to a new forecast by the International Monetary Fund.
The IMF’s prediction, in its latest global economic outlook released Tuesday, is a further downgrade from its April forecast that Zimbabwe would see negative economic growth of -5.2%. The new forecast is also worse than government’s own prediction of a 6.5% decline, given by Finance Minister Mthuli Ncube in a pre-budget policy statement released on October 4.
In its latest outlook, the IMF projects the Zimbabwe economy to recover and grow by 2.7% in 2020, a smaller recovery than the 4.6% rebound seen by the Zimbabwe government.
This year will be the first time that Zimbabwe suffers a GDP contraction since 2008, when the economy shrank 16.5% at the peak of a hyperinflation crisis.
The negative forecasts from the IMF contrasts with its optimism in October, when it predicted that Zimbabwe would grow the economy by 4.2%, adding to expected 2018 growth of 3.4%. Since that outlook, Zimbabwe has slipped back into high inflation, driven mostly by the collapse of the reintroduced local currency, and worsened by the worst drought to hit the region in almost four decades.
Earlier on Tuesday, official data showed month-on-month inflation running at 17.72%. While Zimbabwe has deferred annual figures to February, to account for the currency switch, the IMF said recently that inflation was 300% year-on-year.
In a statement released following the visit of an IMF team in September, the IMF said Zimbabwe faced a deep recession in 2019, feeling the effects of drought and Mthuli’s attempts at fixing the budget.
“GDP growth in 2019 is expected to be steeply negative as the effects of drought on agricultural production and electricity generation, impact of cyclone Idai, and the significant fiscal consolidation to correct past excesses serve to drag on growth,” the IMF said then.
Before predicting the 6.5% drop in GDP, Mthuli had optimistically forecasted 3.1% growth in his maiden budget speech last November, before revising his outlook to a 2.1% contraction during a mid-term review on August 1.