The International Monetary Fund (IMF) maintained on Thursday night that Zimbabwe’s economy will recover by 3.1% this year despite the country’s ambitious economic growth target of 7.4% this year but said would be happy if growth is higher.
In October last year, the Fund had projected a growth of 4.2% but early this month cut its growth forecast to 3.1%.
Responding to a question on why the Fund is less optimistic than the government during a regional Economic Outlook Press Briefing on Sub-Saharan Africa, IMF African Department Director Abebe Selassie said, the country continues to have very limited access to external concessional support.
“And of course, domestically also, the government’s ability to finance itself from — by issuing bonds or borrowing from the banking system is very constrained given the monetary and exchange rate framework that the country has a susceptibility to inflation,” he said.
“So, we feel that with the limited fiscal support, with the toll of the pandemic on economies, on peoples’ lives, livelihoods, we feel that the robust, growth recovery this year will be constrained to the order of 3%. But we — this is a point we’d be very happy to be proven wrong on.”
These projection corrections come as the southern African nation is facing a slow vaccine rollout, which might still make it a risk area and jeopardize its tourism sector recovery. As well the country faces lower gold deliveries as many hiccups still surround pricing and payment periods, and the unbundling of FPR is still being done.
Firms in the country might take a while to recover from the pandemic especially in the absence of a proper bailout from the government unlike other countries.
“If growth is higher, we would be very happy,” he said.
The IMF expects inflation coming down from the very high levels it was in during 2019/2020 on account of the droughts that Zimbabwe and Zambia had suffered from.
“That said, given the absence of new inflows, we do see a constrained environment and a much more constrained evidence for supply of goods and services — so we expect inflation to be a bit higher.”
The Zimbabwe economy shrank by 8% last year, less than its initially projected 10.4%, according to the IMF. Also the Fund said the southern African nation’s GDP will grow by 4% in 2022 and 2.5% in 2026.
The African Development Bank (AfDB) recently projected Zimbabwe’s economy to grow 4.2% this year and 3% in 2022 if effective measures are taken to stabilize foreign exchange and avoid excessive money creation. The World Bank last year projected economic growth of 2.9% in 2021 – Harare