Zimbabwe has registered positive growth rates in the last three years. Economic Planning and Investment Promotion secretary Desire Sibanda gave an insight into how the economy performed in 2011 and what the future holds. Below are excerpts of his analysis.
In 2011 Zimbabwe was among countries which recorded an impressive estimated gross domestic product (GDP) growth rate of 9,3%. In this regard, Zimbabwes growth for 2011 was greater than that of its neighbours (Zambia, Mozambique, South Africa, Malawi and Botswana).
Zimbabwe overtook Brazil, Russia, India, China and South Africa in terms of economic growth rates, which have been increasing in the previous years. Even China was projected to have grown by 9,2% in 2011.
Statistics confirm the economy is well on the recovery trajectory. The economic stability achieved under Short-Term Economic Recovery Programme which prompted the adoption of multi-currency system brought a new lease of life in the countrys growth prospects. If the country manages to religiously follow the medium-term plan (MTP) and ensure synergy with the Budget, the economy will become one of the best economies in Africa in the outlook period.
The outlook for the next five years will be shaped by a reform agenda hinged on raising competitiveness through value addition, increased public investment and targeted interventions in the agricultural sector.
Political stability is assumed to prevail in 2012; this is key to sustainable economic recovery.
An example of the adverse effects of political instability is the case of Egypt whereby its foreign reserves fell to $22 billion in October 2011 down from $36 billion before the uprising. The countrys main foreign currency earner, tourism fell by 25% in 2011.
The Zimbabwe economy is rebounding after a decade of economic decline in which real time gross GDP fell cumulatively by about 50% from 2000 to 2008 and the economic decline was combined with prolonged hyperinflation.
However, the economy has been registering positive growth since 2009.
There is a general consensus inflation particularly hyper inflation is a number one enemy of the people. Little inflation is however, not bad.
Governments often strive for an inflation rate around two or 3% per year. Such low inflation is beneficial for the economy. The MTP envisages single digit inflation rates throughout the plan period.
Mining activities in Zimbabwe have the potential to turnaround the economy. In this regard approved lines of credit in support of investment in equipment into the mining sector in 2011 amounted to $502 million.
It is anticipated in the outlook period, the sector will remain the driving force behind overall economic growth especially because of diamond reserves. The sector is anticipated to benefit from further private capital injections and firm international commodity prices.
However, despite firming commodity prices, revenue collections from Zimbabwes mining sector have been low, hence the upward adjustment in mining royalties.
It is good news the 2011 manufacturing survey highlighted the capacity utilisation has risen by 13,5% in the 12 month period to 57,2% from 43,7% recorded at the end of the first half of 2010.
This is a positive indication showing the target set in the MTP can be achieved if the growth in the capacity utilisation maintains the same momentum. The MTP highlighted that it intends to increase capacity utilisation to 80% by 2015.
However, the percentage of manufacturing sector exports as a percentage of total exports remains at 27%. This shows there is still need to inject more investments into the manufacturing sector to deal with all problems militating against the growth sector.
The factors which continue to constrain the sector include low product demand in some companies, lack of working capital which includes unfavourable terms of financing, machine breakdown and lack of raw materials, among others. This remains the mainstay of the economy and is an important sector for guaranteeing food security as well as supply of raw materials for the manufacturing sector.
The hosting of the United Nations World Tourism Organisation General Assembly will definitely boost tourist arrivals in Zimbabwe in the outlook period.
l Desire Sibanda is Permanent Secretary in the Ministry of Economic Planning and Investment Promotion