ZIMBABWE’S economic growth prospects in the next two years are subdued in contrast to Sub-Saharan Africa which is expected to grow to an average 4,6 percent in 2016 and to accelerate to 5 percent in 2017.
According to the World Bank’s Global Economist Prospects for June, Zimbabwe’s economy will grow by anaemic 1% this year and will be at 2.5% in 2016 and 3.5% in 2017.
The economy remains in a fragile state, with an unsustainably high external debt and massive de-industrialisation and informalisation.
Zimbabwe is currently in a state of inertia (stagnancy) but the main concern is lack of institutional functionality as there is not much the Government can do in terms of policy.
Economists say that what is required to kick-start the growth process is structural adjustment and to get things working particularly in key state enterprises such as NRZ and Air Zimbabwe. SOE are at the point where they have to justify their worth to the country and economic growth is almost always linked to power, transport among other things.
“As it is now ZESA, NRZ, Air Zimbabwe have been inefficient for long no one knows their economic potential. If NRZ starts working efficiently the whole agro and mining industry will change. The same for ZESA and other key institutions. There is a multiplier effect if these institutions start functioning but at the moment this is unknown,” according to opinion from a local analyst.
The country is estimated to have grown 3.2% in 2014 while Government forecasts for this year are at 3.2% and the IMF revised it to 2.8%.
The report says that GDP growth in Sub-Saharan Africa is expected to pick up moderately in 2016-17 after slowing in 2015 at 4.2% helped in part by a boost to private consumption from lower oil prices.
“The increase in growth will also be supported by continuing infrastructure investment and private consumption fuelled by lower oil prices.”
External demand is also expected to grow 5% in 2015 and 5.6% in 2016-17, a faster pace than several other developing regions.
The report notes China’s investment slowdown and low commodity prices suggests that FDI flows may not provide much support to growth. At the same the region’s export receipts are expected to be low due to low commodity prices.
The World Bank says that structural reforms are needed to ignite and sustain rapid productivity growth. “An acute infrastructure deficit, especially in electrical power and transport. In particular, it will be critical that improvements in public investment management systems are accompanied by efforts to ensure that resources are allocated to the most productive ends.”
The report adds that reform efforts should aim at strengthening project selection, execution and monitoring, and encourage transparency and accountability in the use of public resources. In addition, reforms will need to focus on improving product and labour markets, easing constraints on trade and investment and fostering human capital accumulation. FinX