Finance and Economic Development Minister Mthuli Ncube (pictured), is expected to cut Zimbabwe’s gross domestic product (GDP) growth for this year when he presents his Mid Term Budget Review statement scheduled for end of this month, Business Times can report.
Ncube had projected a 5.5% GDP growth this year, underpinned by growth in agriculture, mining and tourism.
But, adverse weather conditions have affected the country’s agricultural output in the just ended cropping season.
The economy is also battling severe headwinds including high inflation, currency volatility, rocketing prices of goods and services and foreign currency shortages, among many troubles.
The World Bank and the International Monetary Fund have forecast a growth of 3.7% and 3.5% respectively.
The Confederation of Zimbabwe Industries president Kurai Matsheza told Business Times challenges facing the economy such as rising inflation, foreign currency shortages, swelling backlog and volatile exchange rate mean “our gross domestic product projections are getting less and less optimistic in terms of achieving them”.
Matsheza said low agricultural productivity levels, coupled with the Russia-Ukrainian conflict has escalated the disruption of global supply chains causing the cost of production to go up thereby triggering price increases to consumers.
“Though we don’t have the exact figure, we expect the economic growth to be within the range of between 3% and 3.7%,” Matsheza said.
“With the new development in the economy the cost of production for all goods is going to go up leaving the manufacturing sector exposed to these challenges that threaten the survival of the sector. Unfortunately, this is the difficult operating environment the economy is living with daily. You can see the prices of bread and basically everything is going up sharply.”
An economist, who requested anonymity, said Ncube will revise the economic growth forecast downwards as the government’s policy measures were too weak to handle the economic pressures.
“I expect (Mthuli) Ncube to revise the economic growth to 3% from his ambitious 5.5% growth projections as inflation, exchange rate and fuel price hikes have exposed their weak policy measures which continue to come short of new global demands.
“I don’t know how these ministers project economic growth as you can benchmark your growth on agriculture when you know that most of your farmers are communal. They don’t have irrigation, access to finance and they are exposed to fierce climate change effects,” she said.
“When Ncube did these projections, he didn’t expect the inflation to be this high at 192%, exchange rate at ZWL$800 per US$1 and new developments in Eastern Europe which has caused fuel price hikes and supply chain disruptions. Ncube got a rude awakening and his prediction will be more realistic at the Mid-Term Budget and Economic Review Statement,” the economist added.
Another economist, Gift Mugano, said the government policies have failed hence Treasury will review economic growth downwards.
“We are going in a one way direction and there is no turning back, hence he (Mthuli Ncube) will review the GDP growth downwards,” Mugano said.
In a ministerial statement to Parliament, Ncube said the government had adopted several measures to stabilise the currency and lower inflation in conjunction with the central bank, including fiscal consolidation and restraining reserve money growth.