HARARE – Zimbabwe has slashed its economic growth forecast from 2,7 percent to 1,4 percent this year due to an El Nino-induced drought which has left at least 5,5 million people in need of food aid.
The new forecast is in line with the World Bank projections of 1,5 percent, as President Robert Mugabe’s government — currently engaged in a deadly factional fight to succeed the nonagenarian leader — is struggling to come up and implementing bold economic reforms.
Finance minister Patrick Chinamasa said the latest data comes after agriculture, long touted as the country’s economic backbone, was badly decimated by one of the worst drought to hit southern Africa in 20 years.
“This prompted revision of the projected 2016 sector growth to –9,9 percent from 1,8 percent,” he said in a first quarter economic update released on Monday.
Chinamasa, one of Mugabe’s right-hand men but whose tenure at Treasury has turned him into a sharp and realist economist, noted that his 2016 National Budget targets might not be reached due to declining revenue on most tax heads as well as expenditure pressures emanating from payments of the outstanding 2015 salaries and wages as well as the associated bonuses.
Data from the Zimbabwe Revenue Authority show that the country missed its first quarter target by 15,89 percent after collecting $725 million from a target of $862 million.
“The rand and other regional currencies, despite, stabilising they remain weak against the US dollar. This has rendered the economy uncompetitive. Consequently, Zimbabwe has now emerged as the regional market for US dollars,” he said.
Economic experts, said the weakening currencies together with slow recovery in global and regional economic activity have dented flow of remittances into the country.
“The combined widening trade gap and slowdown in flow of remittances, posed challenges to the financial sector liquidity. This has seen the market experiencing some temporal cash shortages, although the Reserve Bank of Zimbabwe was quick to react,” Chinamasa added.
During the first quarter, the 2016 manufacturing growth rate was revised downwards from the budget projection of 2,1 percent to 0,5 percent.
Chinamasa said the revision was necessitated by subdued economic activity prevailing in most of the sub sectors.
Market watchers say the gloomy picture painted by Chinamasa is reflective of the worsening economic challenges as Zimbabwe is tilting towards recession — its first since 2008, when hyperinflation clocked 231 million percent and Mugabe lost his first ever election.
Deflation has taken root as consumer demand shrinks and the economy struggles with a shortage of dollars.
Once bustling factories in Harare and other major cities and towns are now rusty shells, as companies struggle to shake off effects of the 1999-2008 economic downturn that cut gross domestic product by about half.
In addition, the mines are reeling from the fall in commodity prices and drought has left 16 percent of the population needing food aid. Formal unemployment stands at more than 80 percent and power shortages are getting worse.