FBC Holdings (FBCH) warns that escalating geopolitical fragmentation — resulting in elevated fuel and fertiliser costs, as well as weakening global investor sentiment — will test Zimbabwe’s firming macroeconomic foundations.
In latest economic report, the financial institution noted that while inflation remains in single digits, the exchange rate has stabilised and fiscal discipline has improved, prolonged global disruptions could intensify inflationary pressures and strain external balances for the year.
This comes as Zimbabwe’s inflation remains pressured, with the annual ZiG inflation easing by 0,4 percentage points to 4,4% in May, while United States dollar inflation accelerated by 0,6 percentage points to 2,8%, reflecting persistent price pressures.
“The central economic question for the remainder of 2026 is, therefore, whether domestic policy measures can absorb prolonged external shocks. Real GDP growth is expected to moderate toward approximately 5% in 2026,” FBCH said.
Advertisements
“This remains comparatively strong by regional standards but reflects elevated energy costs, slower global growth, tight monetary conditions and agricultural input pressures. Inflation is expected to rise further through May and June before stabilising.”
It added: “Provided the Middle East conflict does not intensify materially single-digit inflation remains achievable; month-on-month inflation should moderate during the second half, and tight monetary policy is likely to remain in place through at least mid-2026.”
On the exchange rate front, however, FBCH expects the ZiG to remain broadly stable, although pressure points remain.
“The principal risks to exchange rate stability remain another significant oil price spike, speculative pricing, increased capital flight and a further acceleration in imported inflation pressures,” FBCH said.
“Nonetheless, reserve accumulation and continued fiscal discipline provide a credible protection mechanism.”
Hence, FBCH noted that the key risks to monitor would be the Middle East conflict duration, agricultural input costs, capital flight and global risk aversion, and International Monetary Fund’s Staff-Monitored Programme (IMF SMP) execution risk.
This is because a prolonged disruption relating to the Middle East conflict would sustain elevated fuel and fertiliser prices, materially increasing inflationary pressure and weakening external balances.
“Higher fertiliser prices could reduce yields during the 2026/27 agricultural season and worsen food security risks,” FBCH said.
Meanwhile, deterioration in global investor sentiment owing to these geopolitical tensions could intensify capital outflows from frontier markets, increasing exchange rate pressure.
FBCH said the successful implementation of the IMF SMP would materially strengthen international credibility noting that failure would “damage re-engagement prospects and weaken investor confidence”.
“Zimbabwe’s economic outlook for 2026 remains somewhat constructive,” FBCH said.
“The economy now possesses a substantially stronger macroeconomic foundation than during previous stabilisation cycles: Inflation remains in single digits; The exchange rate has stabilised; Fiscal discipline has improved; Foreign reserves have strengthened; The IMF SMP provides external policy credibility.”
However, it added, as external conditions have deteriorated materially, as geopolitical fragmentations persist, the level of uncertainty has been pushed to unsustainable levels.-newsday
