THE World Bank says Zimbabwe’s prospects remain favourable in the long-term provided structural issues can be effectively addressed.
BY VICTORIA MTOMBA
Speaking at the launch of the first Zimbabwe Economic Update, World Bank senior economist, Johannes Hederschee, said the country was not going into recession because the services sector continues to grow.
“[the] services sector is more stable in Zimbabwe than other sectors. The services sector requires a trained and well-educated workforce and Zimbabwe has that in abundance,” he said.
Hederschee said growth was held back by low investment and ongoing balance of payment adjustments. He said in 2010 and 2011 the country was better but between 2012 and 2015 growth rates slowed compared to the rest of the African continent.
“Zimbabwe short-term economic outlook is modest. Economic growth is projected at 1,5% in 2016 to 2,7% and 3,1% in 2017 and 2018 respectively. After a difficult year in 2016, the agricultural sector is expected to resume its strong growth trend in 2017 and 2018, bolstered by the adoption of new climate specific seed varieties and other measures to adapt climate change,” the report showed.
The report showed that 2016 would be a difficult year with growth at around 1,5%.
Speaking at the launch, Finance minister Patrick Chinamasa said the country would achieve the 2,7% target.
“The major policies are now in place what is left is implementation and the World Bank appreciates the challenges and openness. They understand the complexity of our country. This economy is resilient there are a lot of activities that are not recorded and this happens when the economy goes informal. There is consensus on the policies we need to pursue we all agree what remains is implementation even the very people who have been blaming us are now expecting us to move faster,” he said.
Hederschee said Zimbabwe has a larger current account deficit than its peers and it was more than the country’s investments.
“Zimbabwe’s current account deficit is substantially larger than average for sub-Saharan Africa and its present level is unsustainable. The current account deficit was on average over 22% between 2010 and 2014 and is estimated to be 17,4% of gross domestic product in 2015,”he said.
The World Bank said to raise growth from its current medium term trend of 2 to 3%, Zimbabwe needs to correct key macroeconomic balances.
“Recent growth has been largely driven by consumption and both public and private investment have fallen since 2011. Capital flows, including external borrowing and asset sales are sustaining consumption growth by financing an unsustainability high current account deficit,” it said. The re-organisation of the rural economy in the wake of land reform provides an opportunity for broad based growth, but both the extent of this growth and its contribution to the public.
Speaking at the launch of the first Zimbabwe economic update World Bank country director for Botswana, Lesotho, Namibia, South Africa, Zambia and Zimbabwe, Guang Zhe Chen said the road ahead will be difficult and there is need to invest in climate change, work on the arrears clearance and safeguarding human capital.