Good rains, power supply boost 2025 growth outlook

GOVERNMENT has projected a 6,5 percent economic growth in 2025 on the back of a good agricultural season, stable power supply and increased activities in the manufacturing sector buttressed mainly by steel production.

In his 2025 Budget Strategy Paper released on Thursday, Finance, Economic Development, and Investment Promotion Minister Professor Mthuli Ncube, also projected the economy to grow by 2 percent in 2024, and 5, 1 percent, and 5, 2 percent in 2026, and 2027, respectively.

According to Minister Ncube, the growth projections will be compounded by the expected stability of the local currency, domestic prices, and the ZiG exchange rate during 2025, on the back of tight fiscal and monetary policy stance being pursued by the Government.

The positive growth projection of 6, 5 percent in 2025 is well above the NDS1 target of 5 percent buttressed by normal to above-normal rainfall given the preliminary forecasts indicating an 85 percent probability of rain as the region is likely to experience La Nina, which is usually associated with normal to above normal rainfall.

Expected stability of power supply is anticipated to add on to the 6,5 percent growth projections.

This will be on account of improved electricity generation at Hwange Units 7 and 8, as well as optimum output from Hwange Units 1 – 6 and improved solar energy generation from Independent Power Producers (IPPs).

However, this is expected to be counterbalanced by the likely subdued international commodity prices.

“Growth in 2025 is expected to benefit from the recovery in agriculture, attributable to the expected normal to above normal rainfall season, as well as increased activities in the manufacturing sector, which will benefit from investments in new steel production.”

Minister Ncube said he was expectant that the new currency, the Zimbabwe Gold (ZiG), domestic prices, inflationary pressures, and the general economic environment were to remain stable in 2025.

Zimbabwe introduced the ZiG on 5 April 2024 to replace the weary and devalued Zimbabwe dollar.

This came as a panacea to spiraling inflation levels, bringing relative stability in prices and the exchange rate.

As a result, ZiG month-on-month inflation declined to -2.4 percent in May 2024, 0,0 percent in June 2024 whilst US dollar month-on-month inflation stood at -0, 3 percent in June, from 0, 1 percent in May 2024.

The weighted month-on-month inflation decelerated by -0, 2 percent in June 2024.

“Both domestic prices and the ZiG exchange rate are expected to remain stable during 2025, on the back of tight fiscal and monetary conditions.

“In the outlook to December 2024, inflationary pressures are expected to remain subdued, due to the tight monetary policy stance being pursued by the Government, complemented by dissipating negative inflation expectations as the local currency unit remains stable against major currencies,” said Minister Ncube.

Minister Ncube said the implementation of stringent measures will continue, to re-establish fiscal sustainability, covering resource mobilisation, enhancing the efficiency of public expenditures, at the same time reducing waste.

He said containing costs of major expenditure heads, such as the wage bill and debt servicing will be critical to creating fiscal space and reducing the risk of monetising the Budget deficit.

“Among other interventions, the Liquidity Management Committee of the Treasury and the central bank will play a greater role in coordinating fiscal and monetary measures to effectively manage liquidity injections into the economy.”

To enhance revenue mobilisation strategies Minister Ncube said some taxes will be paid exclusively in local currency, including payment for Government services in line with the de-dollarisation roadmap.

Minister Ncube noted that the current review of the tax structure and regime seeks to widen the tax base and improve the efficiency of the tax system, taking into account the country’s dynamics and context.

He said the restructuring of the tax incentive scheme and tax expenditures also seek to standardise the tax regime and support a private sector-led overall economic growth.

“In support of the use of the domestic currency, the ZiG, Government will require taxpayers to settle a sizable proportion of their tax obligations in local currency, irrespective of the currency of trade. Already, customs duties are now payable in local currency.”

Critically the 2025 taxation proposals will focus on further streamlining of tax expenditures, in particular, for the extractive sectors, where the Government has already excluded the mining sector from Special Economic Zone incentives, to ensure a fair share of the country’s finite resources.

The Treasury Chief said the Ministry will introduce automatic registration of qualifying micro, small, and medium enterprises for Value Added Tax (VAT), Pay As You Earn (PAYE), Corporate Income Tax (CIT), among other revenue heads in all economic sectors to enhance optimal contribution to the fiscus.-ebusinessweekly