Zim economy forecast to maintain growth trajectory

FBC Securities sees Zimbabwe maintaining the economic growth trajectory from last year
given the positive developments in mining and tourism, which make up the key sectors
that drive the Southern African country’s economy.

The country’s mining sector has immense potential to drive socioeconomic development
and growth, underpinned by strategies designed to transform the sector to a US$12
billion industry by 2023.

The tourism sector has on the other hand witnessed growth following the relaxation of
Covid-19-induced travel restrictions and lockdowns.

The securities research firm said in its third quarter Zimbabwe economic review report
that the country’s tourism sector was on a growth trajectory with tourist receipts
increasing by 121 percent to US$337,5 million, compared to US$152,8 million during the
same period last year.

During the first half of the year, tourist arrivals were up 115 percent compared to the
same period last year.

“We anticipate increased economic activity ahead of the festive season, particularly for
businesses in the consumer sector.

“Convergence of the official and parallel market rates, coupled with improved
availability of foreign currency is also a positive development for local businesses,” it
said.

Following Government interventions aimed at taming inflation and market indiscipline,
inflation began to decelerate. Inflation data has shown a decline in monthly inflation
from 30,7 percent in June to 3,5 percent in September 2022.

The country has witnessed relative stability in the foreign currency exchange rate in
recent weeks and FBC Securities said if sustained, this may result in equilibrium between
the willing buyer willing seller (WBWS) rate, interbank, and the alternative rate.

To further liberalise the foreign exchange market, authorities increased the maximum
amount entities can purchase from banks for bona fide foreign payments under the
willing-buyer willing-seller system from US$20 000 to US$100 000 per week per entity.

FBC said further liberalisation of the foreign exchange market will increase the
availability of foreign currency, ease pressure on the official auction, and aid in taming
currency devaluation.

It said the introduction of gold coins had provided investors with an alternative asset
class and assisted the Government in mopping up excess RTGS liquidity.

A total of 9 516 gold coins valued at $9 billion (Zimbabwe dollars) had been sold as of
September 23, 2022, with 35 percent having been purchased by individuals and 65
percent by corporates. FBC Securities noted that growth may, however, be below the 4,6
percent projected by Finance and Economic Development Minister Mthuli Ncube in his
mid-term budget review owing to restrictive factors such as the currency crisis,
inflationary pressures, liquidity constraints and power shortages.

“We also note the upward revision of interest rates, increasing the cost of borrowing, as
a limiting factor to desired growth projections as it weighs down aggregate demand,” it
said.

The Government revised economic growth forecasts for 2022 from initial projections of
5,5 percent to 4,6 percent, citing continued global and domestic inflationary pressures,
global geopolitical tensions, and the consequences of ongoing global warming and the
Covid-19 pandemic.

The International Monetary Fund also expects Zimbabwe’s economy to decline by around
half of its 2021 levels to 3,6 percent in 2022 with the decline attributed to a slowdown in
agriculture and energy outputs and rising macroeconomic instability, amidst a recovery
in mining and tourism.

Agriculture, one of the country’s economic mainstays, is projected to contract by
negative growth of five percent from an initial 5,1 percent growth projection.

FBC Securities said low rainfall, input distribution bottlenecks, and high cost of inputs
have largely been restrictive factors for agricultural output.

“The country is however, expected to reach self-sufficiency with a wheat harvest of 380
000 tonnes. “Given the volatility of global wheat prices in the current year and supply
disruptions, this would be a positive development for the country in terms of controlling
the import bill as well as improving food security,” it said.

Gold deliveries to Fidelity Printers and Refinery grew 35,28 percent in the nine months to
September.-The Herald