Monetary stability key to economic growth: FBC Securities

MONETARY sector stability remains a major determinant of the attainment of the envisaged economic growth with companies having to tread cautiously through strategies in 2025, a local research firm has said

This comes as the country is expecting a normal to above normal rainy season while the gross domestic product (GDP) is seen growing by 6,5%.

In its 2025 economic outlook, FBC Securities said since the introduction of the Zimbabwe Gold (ZiG) currency, the monetary sector has been generally stable and expectations are moderately high that the stability will persist in the first half of 2025.

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“Robust mining and construction sectors and a growing tourism sector are likely to anchor the anticipated growth,” FBC Securities said.

“However, monetary sector stability remains a major determinant of the attainment of the envisaged growth.

“Since the introduction of the Zimbabwe Gold (ZiG) currency, the monetary sector has been generally stable, and expectations are moderately high that the stability will persist in the first half of 2025.

“At a global scale, on-going geopolitical conflicts are likely to continue suppressing the global economy.”

The research firm said the outcome of the election in the United States is likely to have a huge impact on the direction of the middle east conflict, the Russia-Ukraine conflict, the China-Taiwan situation, the South Sudan civil war and disturbances in the Democratic Republic of Congo.

It added that the probability of these tensions escalating is still very high, with North Korean forces now reportedly aiding Russia.

The firm said post-election disturbances in Mozambique have also created fresh supply-chain difficulties likely to impact the year.

“Businesses ought to tread cautiously through strategies such as expanding (diversifying) supply chains across regions, onshore or nearshore production to reduce dependency on distant or geopolitically sensitive areas and investing more in essential goods/services and resilient sectors,” the firm said

The year 2024 saw a 2% GDP growth with key challenges, which include limited access to affordable funding for businesses, high utility costs (electricity and water shortages), the El Niño-induced drought reducing hydro-power output and agricultural yields and decline in global commodity prices suppressing export earnings, among others.

Other challenges incude contractionary demand-management policies, which dampened economic activity, government’s dependence on domestic borrowing crowding out private investment as well as sluggish recovery in global economic conditions reducing trade opportunities.

However, on the positive side, the country witnessed infrastructure investments driving localised growth while stability in monetary policies provided a buffer against runaway inflation.

Resilient sectors like tourism, construction and mining led recovery efforts in the year.-newsda