Tough times ahead, research firm warns

As such, the firm projected real gross domestic product (GDP) growth of 3,1% as opposed to the government’s forecast of 3,5%.

RESEARCH firm Morgan & Co has predicted that 2024 will be a challenging year for Zimbabwe, considering elevated soft commodity prices and a drought season in the agricultural sector, among other economic issues.

As such, the firm projected real gross domestic product (GDP) growth of 3,1% as opposed to the government’s forecast of 3,5%.

EFE Securities projects a GDP growth at 2,9%, while Mark & Associates Consulting Group forecasts economic growth to be sluggish at 2%.

In its Zimbabwe economic outlook and equity strategy report for 2024, Morgan & Co said the political landscape remained fragile considering the disputed elections and Sadc’s concerns regarding the nation’s electoral process.

“We opine that this will deter any significant FDIs (foreign direct investments) into the country,” it said.

“As Morgan & Co, we think that 2024 will be a turbulent year for Zimbabwe considering elevated soft commodity prices, depressed metal prices and a drought season in the agricultural sector among other  economic issues and estimate a slightly weaker real GDP  growth of 3,1% in 2024.”

The agriculture sector is projected to contract by -4,9% this year due to the anticipated normal to below-normal rainfall pattern. The mining sector is projected to grow by 7,6%.

The firm said Zimbabwe’s sovereign credit rating remains relatively unattractive to international lenders because of a high external debt ratio of 62% versus developing countries average of 30%.

The country also has a high recurrent government expenditure that has significantly affected its ability to pay back loans and low tax to GDP ratio compared to regional peers, largely as a result of porous borders and entrenched shadow economy.

As most international lenders’ doors remain shut on Zimbabwe, the research firm said the country will be forced to sweat internal resources in meeting real growth targets this year.

“While export receipts are expected to be lower in 2024, we note that the decline in United States inflation closer to the 2% target suggests that the Fed could be done with interest rate hikes,” the report read in part.

“This will likely drive US interest rates lower in 2024 and the subsequent selling pressure of the US$ warrants emerging markets currencies such as the rand firming against the US dollar.

“Such a scenario could result in a decline in Zimbabwe’s imports from South Africa and somewhat offset the impact of the lower FX (foreign exchange) inflows on the trade balance,” the firm said.

In terms of inflation rates and exchange rates, the firm said 2024 was already proving to be quite a challenge to decipher with the global turmoil and local risks remaining elevated.

Morgan & Co reiterated the fragile political environment that could extend to fiscal policy.

“Furthermore, the monetary policy direction could very much change considering that (John) Mushayavanhu will be replacing the current governor, John Mangudya as his second term comes to an end in the first half of 2024,” the firm said.

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