THE global economy is projected to grow slightly at 3,7% from 3% in 2013 due to recovery in advanced economies, the International Monetary Fund has said.
In its World Economic Outlook update released yesterday, the international financial institution said global activity strengthened during the second half of 2013.
“Activity is expected to improve in 2014-15 largely on account of recovery in the advanced economies. But downward revisions to growth forecasts in some economies highlight continued fragilities, and downside risks remain,” the report has shown.
The IMF forecast the global growth to rise to 3,9% in 2015.
The IMF said advanced economies output gaps remain large and, given the risks, the monetary policy stance should stay accommodative while fiscal consolidation continues.
“In many emerging markets and developing economies, stronger external demand from advanced economies will lift growth, although domestic weaknesses remain a concern. Some economies may have room for monetary policy support.
“In many others, output is close to potential, suggesting that growth declines partly reflect structural factors or a cyclical cooling and that the main policy approach for raising growth must be to push ahead with structural reform,” the IMF said.
While regional peers such as Angola and Mozambique are this year expected to register strong growth, price fluctuations on the commodities market are expected to slow down Zimbabwe’s growth rate.
Analysts contend that the Zimbabwean economy is likely to remain under pressure in 2014 as capital constraints continue to clip recovery prospects. There is a growing need to mobilise funding for all sectors of the economy if the country is to arrest the economic slowdown gripping the nation.
Finance minister Patrick Chinamasa set growth projections for this year at 6,1% a figure that analysts have said is unrealistic due to depressed commodity prices as well as poor economic activity.
The country is facing liquidity challenges and has failed in the past five years to attract foreign direct investment (FDI) due to policy inconsistencies. On a regional scale, Zimbabwe is among countries that have challenges in financing its budget deficits as it has low FDI. Countries such as Mozambique, South Africa and Zambia have FDIs that are above $1 billion which makes it easy for them to cover up for the budget deficits.
The country’s FDI has not surpassed $500 million in the past five years and the country is still trying to look for ways to attract funds from foreign investors.
The mining sector which contributes over half of exports in Zimbabwe also requires fresh capital to boost output.
According to the Zimbabwe Investment Authority (ZIA), in the nine months to September 2013 foreign direct investment amounting to $453,70 million was invested into the economy with China contributing 64% of the investment.
The manufacturing sector received the bulk of the investments worth $143,67 million (32%) for 47 projects, followed by mining which had 48 projects approved valued at $131,34 million (29%) while construction got $127,45 million (28%) for five projects.
The services sector had 18 projects approved at $42,62 million (9%). Tourism on the other hand had only two projects valued at $3,36 million (0,7%). Transport got $5,25 million (1,2%) for one project while no project was approved for agriculture.
In 2013, global growth stood at 3% according to the IMF due to a downward revision of quarter percentage point each year compared with the forecasts in April 2013.
The IMF said underperformance was due to continuing growth disappointments in major emerging market economies, a deeper recession in the euro area, and a slower United States expansion.
The weaker prospects in 2013 were reflecting, to varying degrees, infrastructure bottlenecks and other capacity constraints, lower export growth, lower commodity prices, financial stability concerns, and in some cases, weaker monetary policy support, the IMF said.