Zimbabwe’s investment outlook remains gloomy with this year’s harmonised elections likely to generate uncertainties, the African Development Bank (AfDB) has said.
BY BUSINESS REPORTER
President Emmerson Mnangagwa told State media on Wednesday that elections would be held in five months.
“The elections scheduled for 2018 are likely to generate uncertainties that will hinder economic growth and investment. The investment environment remains gloomy,” AfDB said in its African Economic Outlook 2018 report.
“According to the World Economic Forum’s 2017/18 Global Competitiveness Report, the most problematic factors for doing business include policy instability, inadequate foreign currency regulations, inefficient government bureaucracy, difficulties in access to finance, inadequate supply of infrastructure, restrictive labour regulations, and inefficient tax administration and regulations.”
The banking group said Zimbabwe’s economic growth was expected to improve to an estimated 2,6% in 2017 from 0,7% in 2016, driven by stronger performance in agriculture, mining, electricity and water.
It said real gross domestic product (GDP) is projected at 1% this year and 2,6% in 2019.
“Economic performance in 2018 is likely to be affected by political changes; real GDP growth is projected to be 1% in 2018 and 1,2% in 2019. The economy continues to face structural challenges from high informality, weak domestic demand, high public debt, weak investor confidence, and a challenging political environment,” AfDB said.
It said Zimbabwe was experiencing a liquidity crisis, which is a manifestation of structural deficiencies and distortions in the economy.
The bank said Zimbabwe’s fiscal policy was highly consumption-oriented, limiting fiscal space for capital and social expenditures.
“Total expenditure picked up as the government expanded the command agriculture programme and maintained the high public-sector wage bill (around 19% of GDP),” AfDB said.
AfDB said a modest recovery in international commodity prices was projected to spur growth in mining.
Energy production is expected to improve following the completion of the Kariba South Extension Plant in December 2017.
Manufacturing sector, the bank said, is likely to see growth on the back of a protectionist policy to support local industry.
“This intervention resulted in significant increases in capacity utilisation in local industry, from 34,3% in 2015 to 47,4% in 2016, before declining to 45,1% in 2017,” AfDB said.
It said weak economic activity in 2016 led to a fall in total revenues of 6% in nominal terms, exacerbating liquidity shortages.
“The 2016 introduction of bond notes pegged to the US dollar saw the emergence of a parallel market for foreign exchange, owing to the shortage of foreign currency. The real exchange rate remains overvalued, undermining external competitiveness,” AfDB said.