Business is pessimistic about the outlook as the economy deteriorates with captains of industry warning of an escalation of the crisis.
Zimbabwe appears to be fighting a losing battle after annual inflation for the month of June rocketed to 192% from 132% in May.
There are growing fears that the inflation rate will continue on the upward trend as the economy grapples with crippling headwinds.
Steve Hanke, a professor of applied economics at Johns Hopkins University in the United States of America, who tracks Zimbabwe’s inflation and other troubled economies in the world, this week calculated the southern African nation’s inflation at 426% becoming the highest in the world, ahead of troubled economies such as Venezuela at 89%, Ukraine (42%), Syria (33%), Sri Lanka (117%), Turkey (108%) and Cuba (85%).
The growing threats of rising interest rates, which the Reserve Bank of Zimbabwe last week hiked to 200% from 80%, currency volatility and foreign currency shortages, among others, is pushing down an already evaporating business confidence.
Zimbabwe National Chamber of Commerce (ZNCC) CEO, Christopher Mugaga, said there was a remarkably high level of business pessimism with industry confidence having fallen to its lowest level.
The slump in business sentiment, Mugaga said, was being largely driven by deteriorating economic conditions as well as populist policies at the expense of the business.
“The second half of 2022 looks gloomy as a result of a high level of uncertainty as a result of drastic policy announcements by the government and build up to the 2023 general elections as we navigate the torrid policy landscape,” Mugaga said.
“One can actually conclude that we as a country have been consistent at being inconsistent and it is slowly becoming a norm.”
ZNCC immediate past president Tinashe Manzungu said it will be a bumpy ride for business.
“Election headwinds are filtering into business activities as the country prepares for the 2023 general elections and businesses’ concerns are being sidelined as the policymakers pursue pro-poor policies to gain election mileage,” Manzungu said.
“The ‘political business cycle’ is not in industry and commerce’s favour during the one and half years. In this regard, the Chamber had a well-placed theme which talks about the business community to devise ways to bolster resilience and innovativeness to weather the storms.”
Poor government policies have resulted in the Zimbabwe dollar depreciating sharply against major currencies, especially the United State dollar, which is increasingly becoming the currency of choice because it stores value.
In its latest report, a research firm, Morgan & Co said the year 2022 is going to be different from the familiar routine of 2020 and ahead of the 2023 presidential elections, the stakes are high and most of the damage will be felt in the economy.
“We contend that it is a year in which politics will have a strong impact on the economic direction of the country as we approach an electioneering period. As the jostle for power plays on, most Zimbabweans have yearned for some form of economic and political stability for many years now,” Morgan & Co said.
Economist Gift Mugano projected a bleak future saying: “…There is a huge likelihood of unproductive money creation since we are getting into an election season and it is likely to affect economic functionalities as resources will not be evenly distributed to other key sectors of the economy.
The government has been campaigning using populist programmes like Pfumvudza and Command Agriculture to reach out to people and it’s not a coincidence that banks have started lending a thing which they have not been doing in the past years. That’s where we start to see high non-performing loans after the elections; the politicians will do this to garner support at the expense of the economy.”
He said the government is using short term financial instruments which are expensive to fund road construction adding that infrastructure of such magnitude needed long term instruments like bonds.
“If we analyse our capital expenditure was usually at 10% but with infrastructure and agriculture projects, the government has pushed it to above 34% which is very abnormal for an economy like ours,” he said.