HARARE – A local lobby group, Buy Zimbabwe (Buy Zim), has slashed the country’s economic growth to a paltry 1,5 percent, from an initial 2,7 projection, arguing that economic headwinds were increasing.
The local procurement advocate organisation last week joined the International Monetary Fund and World Bank in slashing the country’s economic projection for 2016 from Finance minister, Patrick Chinamasa’s 2,7 percent to 1,5 percent.
“Coming on the heels of a severe drought in 2015, the outlook for 2016 remains difficult and growth is projected to remain around 1,5 percent or below.
“Growth has slowed sharply since 2012 as the impact of dollarisation ran its course, and the economy’s vulnerability to climate and terms of trade shocks resurfaced and the concomitant effects of cash shortages,” Buy Zim said, in a statement released last week.
The lobby group also said the global economy was slowing as commodity prices remained depressed while terms of trade with Zimbabwe’s main trading partner — South Africa were deteriorating in the wake of El Nino effects on agriculture already being felt.
“Buy Zim recognises that Zimbabwe’s economy made a strong recovery during 2009 –2013, following dollarisation and stabilisation measures.
“The fundamentals for this recovery are still strong, but the headwinds are increasing. Traditional sectors — agriculture, mining and industry are facing key challenges and in the process of structural transformation,” Buy Zim said.
The organisation said to raise growth from its current medium term trend of between one and two percent, Zimbabwe needed to correct key macroeconomic balances.
“Recent growth has been largely driven by consumption, and both public and private investment has fallen since 2011. Capital flows, including external borrowing and asset sales, are sustaining consumption growth by financing an unsustainably high current account deficit,” the organisation said.
Buy Zim said without exchange rate policy, tackling the present current account deficit and low investment ratios, the country needed improvements in productivity and adjustments in public spending, both of which take time but also have a more durable impact on competitiveness.
“These headwinds and the brunt of the economic corrections, both domestic and global, will likely be most deeply felt by poor households.
“In Zimbabwe, without substantial improvements in the allocation and efficiency of public spending, the recovery could well be regressive, increasing inequality rather than further dampening it,” Buy Zim said.