Fitch projects 3pc growth, lower than Treasury, AfDB and World Bank

Fitch Solutions paints a sobering picture of Zimbabwe’s economic landscape, emphasising its susceptibility to external shocks such as weather variations, energy deficiencies, global commodity prices and wavering investor confidence.

According to their projections, the country’s economic growth is anticipated to decelerate from an estimated 4,6 percent in 2023 to a modest 3 percent this year.

Jane Morley, Fitch’s head of Sub-Saharan Africa Country Risk at Business Monitor International, highlighted the limited efficacy of the National Development Strategy 1 in addressing these systemic issues.

“While initiatives such as the National Development Strategy 1 may offer some respite, the persistent volatility in the foreign exchange market and its ripple effects on inflation pose formidable challenges to investor confidence and economic expansion,” Morley said.

On Tuesday, the International Monetary Fund (IMF) said the country will see growth of 3,2 percent in 2024 on the back of a drought and increasing commodity prices.

The most recent IMF outlook, published this week, indicates that Zimbabwe’s economy expanded by 5,3 percent in the previous year and by 6,5 percent in 2022. However, projections suggest a deceleration in growth for 2024, attributed to drought conditions and declining commodity prices.

These came after the African Development Bank (AfDB) projected Zimbabwe’s economic growth forecast of 3,6 percent for 2024 which is within the range of other international financial institutions.

Finance, Economic Development and Investment Promotion Minister, Prof Mthuli Ncube, during his budget statement last October, said Zimbabwe’s economic growth is expected to fall to 3,5 percent in 2024 from 5,5 percent in 2023, mainly due to an anticipated drought caused by El Nino.

The World Bank has since revised Zimbabwe’s economic growth projections both for 2023 and 2024 in its latest global economic prospects.

The Bretton Woods Institution revised its Zimbabwe gross domestic product (GDP) growth forecast to 3,5 percent for 2024 from a forecast in June 2023 of 3,4 percent.

Dr Prosper Chitambara, an economist, weighed in on the situation, noting; “Zimbabwe’s economy remains highly vulnerable to a multitude of challenges, ranging from erratic weather patterns to fluctuating global commodity prices. These factors continue to undermine efforts towards sustainable economic growth.”

Gladys Shumbambiri-Mutsopotsi, another economist, echoed similar concerns saying; “The anticipated slowdown in economic growth underscores the urgent need for comprehensive structural reforms to mitigate the impact of external shocks and foster resilience.”

Morley further emphasised the precariousness of Zimbabwe’s consumer sector amidst policy uncertainties.

“Policy ambiguity compounds the challenges faced by Zimbabwe’s consumer sector, exacerbating inflationary pressures and deterring foreign investment,” Morley added.

In response to these challenges, Zimbabwe recently introduced a new gold-backed currency, Zimbabwe Gold (ZiG), aiming to stabilise its monetary system.

Denford Mutashu, President of the Confederation of Zimbabwe Retailers, acknowledged the significance of this move, highlighting its potential implications for the economy.

“The adoption of Zimbabwe Gold marks a pivotal shift in the country’s currency framework, with far-reaching ramifications for economic dynamics and financial transactions,” Mutashu remarked.

Reflecting on past currency experiments, such as the introduction of bond notes in 2016, economists caution against repeating past mistakes.

“The history of currency interventions in Zimbabwe underscores the importance of prudent monetary policies and robust institutional frameworks to safeguard against currency volatility,” Dr. Chitambara warned.

Indeed, the depreciation of bond notes against the US dollar due to unchecked money supply growth serves as a cautionary tale.

“The erosion of confidence in previous currency initiatives underscores the imperative of sound fiscal management and transparency in monetary policy,” Shumbambiri-Mutsopotsi emphasised.

As Zimbabwe navigates its economic challenges, the consensus among economists is clear that sustainable growth hinges on proactive measures to address structural deficiencies and restore investor confidence.

Only through concerted efforts and pragmatic reforms can Zimbabwe chart a path towards economic resilience and prosperity.-ebsuinessweekly