2023 GDP growth rate in line with forecasts, GCF at 16% is relatively low

HARARE – Zimbabwe’s annual GDP for 2023 grew at a rate of 5.3% at constant prices driven by key industries, aligning with earlier government projections. The Accommodation and Food Services sector stood out as a significant contributor, achieving an impressive growth rate of 26.4%. This increase highlights the sector’s recovery following the pandemic, fueled by a rise in domestic tourism and hospitality services.

Other sectors also showed notable growth, with Information and Communication expanding by 16.1% and Transport and Storage increasing by 10.0%. The Construction industry, which faced difficulties in previous years, rebounded with a growth rate of 6.8%, signaling renewed investment in infrastructure development.

According to Zimstat, the GDP at current prices for 2023 is estimated at a remarkable ZWL133.703 trillion, reflecting the dynamic nature of various sectors. This translates to approximately US$21.9 billion using the official exchange rate at the end of 2023, (although caution is advised when converting nominal rates to US dollars due to the lack of a well-defined average exchange rate. The Treasury has previously utilized the closing official exchange rate for such conversions.)

By sector, Wholesale and Retail Trade remained the largest contributor to economic growth at 19%, slightly up from 18.7% in 2022, underscoring the ongoing informalisation of the economy. Mining and Quarrying showed minimal change at 13.3% (compared to 13.2% in 2022), with growth driven by the lithium sector, which offset challenges in gold and PGM production experienced last year.

Agriculture, in what was widely regarded as a bumper harvest year, contributed 12.1%, up from 12%. The manufacturing sector, often seen as a problem area, accounted for 10.9% (down from 11.2% in 2022), while Finance and Insurance contributed 8%, a slight decrease from 8.2% in the previous year.

GDP GROWTH RATES (%) FOR SELECTED INDUSTRIES AT CONSTANT PRICES

Zimbabwe is targeting a modest growth rate of 2% this year, with Finance Minister Mthuli Ncube emphasising the goal of returning to an average growth rate of 5%, which is essential for the success of the National Development Strategy (NDS) economic programme.

Zimstat also reported quarter-to-quarter growth rates, with the fourth quarter of 2023 showing a significant increase of 2.8%, up from 0.7% in the third quarter.

Final consumption expenditure for 2023 was estimated at ZWL122.2 trillion, representing a substantial 91.4% of total GDP. This figure highlights the critical role of consumer spending in driving economic activity and sustaining growth across various sectors. The rise in final consumption expenditure indicates improved consumer confidence and spending power, as households and businesses responded positively to the economic environment. However, this surge in consumption is expected to slow down this year due to the impacts of drought on household income and broader macroeconomic challenges.

Gross National Income (GNI) for 2023 was estimated at ZWL132.1 trillion, reflecting the total income earned by residents of Zimbabwe, including net property income from abroad. The GNI figure, which accounts for income generated by Zimbabwean residents regardless of its source, is vital for understanding the overall economic health of the nation.

The report also indicated that gross capital formation for 2023 was estimated at ZWL21.8 trillion, which constitutes 16.3% of GDP. This figure represents the total value of the net increase in physical assets (investment) within the economy during the year. GCF is crucial for assessing a country’s economic health, as it indicates the level of investment aimed at enhancing productive capacity. A higher GCF typically suggests that businesses and the government are investing in future growth, potentially leading to increased economic output and job creation. In many developing countries, GCF as a percentage of GDP usually ranges from 20% to 30%, making a ratio of 16.3% relatively low in comparison to these benchmarks.-finx