Zimbabwe’s recovery needs to be underpinned by policies promoting longer-term, structural economic transformation such as reducing state interventions in the economy, lessening the regulatory burden, strengthening governance and anti-corruption, lowering barriers to regional trade integration and removing forex retentions, latest report shows.
According to the World Bank Zimbabwe Economic Update (ZEU), the country’s economic recovery is underway and expected to strengthen in 2022, but significant constraints to growth remain at the local, regional and global level.
In 2021, the country’s GDP is projected to grow by 3.9%, an improvement of growth rate of 11.9 percentage points compared to 2020.
In the first few months of 2021, global uncertainty with respect to the pandemic persisted.
“The second and third waves of the pandemic and uncertainties about the likely timing for a broad-based roll out of the vaccine in Zimbabwe and its key trading partners will suppress external demand,” reads the report.
“Domestic demand will remain subdued in 2021 as inflation remains high and the continued use of export retention policies constrains productivity and competitiveness.”
Building on the positive trajectory in 2021, ZEU states that economic growth will accelerate in 2022 as the adverse impacts of the pandemic subside with increased deployment of vaccines worldwide and as implementation of National Development Strategy policies bear fruit.
The fiscal balance is projected to turn into deficit in 2021 but remain within sustainable limits, at 1.5% in 2021 and 2022. Revenues will recover gradually – as a percentage of GDP – due to post pandemic effects.
Inflation is expected to fall from 557.1% in 2020 to 86% in 2021. Already inflation has been slowing between January and April 2021.
“Conservative monetary policies are expected to reduce inflation and stabilize prices in the medium-term. Assuming appropriate policies, prices could stabilize by 2022 at a much lower inflation rate of around 22 percent.”
The current account surplus is expected to gradually fall to 4.3% in 2021 and 2% in 2022. Favorable rainfall in 2020 is expected to drive growth of the agriculture sector to 9.1 in 2021, according to the report – Harare