STOCKBROKING firm FBC Securities says restrictive factors such as the currency crisis, soaring inflation, liquidity constraints, policy missteps and perennial power shortages will weigh heavily on the country’s economic growth prospects this year.
The government has lowered growth forecast for 2022 from the initial projection of 5,5% to 4,6%, citing continued global and domestic inflationary pressures, global geopolitical tensions and the consequences of ongoing global warming and the COVID-19 pandemic.
The International Monetary Fund projected that Zimbabwe’s GDP will grow by 3,6% this year, about half of its 2021 level, due to a slowdown in agriculture and energy output and rising macroeconomic instability, despite recovery in mining and tourism.
In its third quarter report, FBC Securities said the global economic outlook remained uncertain, hampered by rising inflation and the ongoing consequences of geopolitical tensions. Most economies have hiked interest rates to tame inflation.
The rapid interest rate hikes are expected to have consequences on the rate of economic growth in the current year as well as next year with a global recession seeming more likely, it said.
“Locally, we believe positive domestic economic growth remains a possibility given the positive developments in the mining and tourism sectors. Growth may, however, be below the 4,6% projection owing to restrictive factors such as the currency crisis, soaring inflation, liquidity constraints, policy missteps and perennial power shortages,” the report read.
“We also note the upward revision of interest rates, increasing the cost of borrowing, as a limiting factor to desired growth projections as it weighs down aggregate demand.
“We expect prolonged liquidity challenges to drive a bearish sentiment on the market. We maintain the view that the bearish market presents buying opportunities in select counters that now appear undervalued, resulting in notable upside potential.”
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Despite the challenges presented by liquidity constraints and global pressures, the securities firm believed the market continues to present investment opportunities in listed counters with resilient business models, capable of weathering the headwinds.
“Ahead of the festive season, deceleration of inflation coupled with an improvement in foreign currency availability is likely to boost business performance,” FBC Securities said.
Following government interventions aimed at taming inflation and market indiscipline, inflation began to decelerate. Inflation data has declined slightly.
30,7% in June to 3,5% in September.
Annual inflation increased to 280,4% in September from 191,6% in June.
To ensure the current disinflation trend is sustained, authorities have resolved to maintain a tight monetary policy stance which should be buttressed by continuous fiscal prudence and close monitoring of wage-push inflation.
FBC Securities said global inflation shocks resulting from geopolitical tensions, rising food and energy prices as well as supply chain disruptions presented downside risks to the country’s inflation outlook.
It said gold coins and the value for money process for all suppliers and contractors to the government were reducing excess real-time gross settlement liquidity inthe economy and continues to weigh down aggregate demand before year end.