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Local market to drive economy

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Treasury predicts the domestic market will drive the economy from this year onwards with the contribution of exports to gross domestic product (GDP), the prime measure of economic growth, falling over time.

The current account deficit is projected widen to $1,041 billion this year or -16% of GDP from $0,927 billion or -18% of GDP in 2009 as a result of excessive import pressure.

The account records the balance of exports and imports. The shortfall on this account is expected to fall to -$858,6 million.

The capital account on the other hand is set to recover from a deficit of $556,5 million in 2009 to a surplus of $578,5 million this year, as inflows of portfolio investments and short-term capital improves.

Based on this short-run movement, Zimbabwe’s overall balance of payments deficit is projected to narrow to $462 million from $1,9 billion last year.

The current account deficit is a result of the inexorable growth in country’s import bill, which is expected to maintain an increasing margin above exports and overseas remittances, currently on a slowdown.

The ratio of exports to GDP is seen rising marginally to around 32% this year from about 28% in 2009, and then fall to about 30% in 2011.

Paradoxically, as the country’s import bill balloons, the ratio of imports to GDP is expected to decline to 55% from 58% in 2009, further losing 5 percentage points to 45% next year.

This is probably because nominal GDP is projected to quicken to $8 billion next year, from an estimated $5,5 billion this year.

The current account deficit is forecast to narrow to -10% of GDP.

South Africa accounts for a significant proportion of shipments into the country. What happens in this economy has an impact on Zimbabwe.

Though increasing, exports are predicted to assume a less important role in the economy’s recovery.

This year the value of exports is expected to increase 25% to $2,5 billion from $2 billion in 2009.

Mineral and agricultural exports are seen driving performance, followed by agriculture.

The wonder commodities comprise platinum and tobacco.

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