Scepticism over Zim growth prospects
06 October, 2011 14:23
Tawanda Karombo
BusinessLIVE
Zimbabwe’s economy, currently battling against a heavy saddle of rampant
price distortions and surging inflation, is expected to slow down in 2012
despite strong growth projections for the current year, Finance Minister,
Tendai Biti has said.
Despite signs of revival, Zimbabwe’s economy has of late given up to the
specter of inflation, with the August year-on-year inflation rate surging to
3.5%, up from the July rate of 3.3% and as largely expected, an increase in
transport costs and electricity tariffs were the major drivers of the
inflationary spike. The September inflation rate is also nominally projected
to increase.
And with investors still a bit skeptical at the moment over the
indigenisation law and over the re-emergence of farm invasions, the
government has been called to create a conducive investment climate and
respect property rights to attract foreign direct investments, crucial for
the revival of the economy.
The local economy has also had to contend with a fresh wave of strikes over
wage increases by employees at some government parastatals and institutions,
as evidenced by the strike by public prosecutors.
However, Biti is still optimistic that Zimbabwe will attain its 9.3%
projected 2011 economic growth target. Yet some economists have warned that
the government, especially Biti’s finance ministry, needs to keep an eye on
rising inflation.
“The 9.3% growth projection is modest and not yet beyond reach but one
begins to worry once the inflation rate begins to continue rising,” said an
economist with a local finance institution. He added: “At the moment growth
projections for 2012 are difficult to assess but as Biti has said, there is
likely to be a slow-down.”
Biti was quoted on Wednesday saying Zimbabwe is projected to register an
economic growth of between 7.8% and 9%, a growth trajectory which is at most
slightly below the current year’s economic growth projection of 9.3%. Biti’s
projections are based on expected growth from the mining and agriculture
sectors.
He has also predicted an average yearly inflation rate of between 3.7% and
5% for the period up to the end of next year. This despite surfacing doubts
among economists and commentators who believe Zimbabwe’s inflation is
expected to be at 4.5% for the current year.
However, the Finance Minister, who also doubles up as secretary general of
the main Movement for Democratic Change (MDC) fronted by Prime Minister
Morgan Tsvangirai, is also expecting further growth from the tourism,
manufacturing and transport and communications sectors.
The communications sector has been particularly buoyant this year, with
major players in the sector embarking on various infrastructure and service
development programmes to enhance their position in the market. The
dollarisation of Zimbabwe’s economy has also resulted in increased average
calls per capita.
“Agriculture and mining will remain the major contributors to overall
growth, with other sectors such as tourism, manufacturing, transport and
communication also increasing their share,” Biti said.
He also said Zimbabwe was likely to collect $3.4 billion in revenue in 2012,
up on the current year’s revenue collection projection of $2.7 billion,
while foreign capital injections and aid facilities are expected to total
$500 million, a figure below this year’s $593.7 million.
Observers and commentators have said that the biggest challenge to any
growth prospects for Zimbabwe’s economy lie largely on political
developments likely to take center stage in 2012. With President Mugabe and
his Zanu PF party’s bid to force elections this year having faltered, it is
widely expected that Mugabe will push for early elections in 2012.
“We can’t talk of sustained growth in 2012 when elections and a new
constitution are expected to chew much of the country’s budget amid
constrained revenue space,” said economist Jeffrey Kasirori. He also said
any political developments could disturb the current pace of economic
growth.
Zimbabwe also has a bloated civil service wage bill that – according to
Biti – is chewing up more than half of the government’s budget and revenue.
The country is still a net importer of goods and commodities from the
majority of its neighboring countries such as SA and Botswana and, according
to experts, the export/import disparity is a major worry.
Biti said export earnings should increase slightly to $4.6 billion next year
from $4.1 billion in 2012, largely driven by mining commodities.