Chinamasa dismisses World Bank’s growth rate projection of 1,5 percent, insists on 2,7 percent
THE World Bank says Zimbabwe’s economy will not slip into recession but will maintain an economic growth rate of 1,5 percent in 2016 anchored largely by growth of the services sector, a projection however dismissed by Government.
Speaking at the launch of the World Bank’s first edition of the Zimbabwe Economic Update magazine in Harare, Senior Economist Johannes Herderschee said while other regional economies are registering negative growth rates due to the strong US dollar currency and falling commodity prices, Zimbabwe has managed to achieve positive growth over the years.
“The GDP (Gross Domestic Product) growth rate slowed from 3.8% in 2014 to 1.5% in 2015 and will maintain that in 2016, due largely to the impact of an on-going drought, which is taking a heavy toll on agriculture production.”
“Zimbabwe’s economy has improved and gained since the year 2009. With this trend, Zimbabwe’s economy is not going into recession, but will continue to grow driven by growth in the services sector,” he said adding that the sector buoyed by the massive human capital in Zimbabwe has been the core of the economy even though it has not received enough recognition.
The sector, currently 60% of GDP, grew at an average rate of 8.5% per year during 2010 to 2014, 4.3 percent in 2015 and is projected to grow by over 3% in 2016. . Construction, finance and insurance and hotels and distribution recorded strong growth in 2015. Telecommunications is also expected to continue to make important contributions to overall growth as its customer base continues to expand. In 2015, the mobile phone penetration rate (active) rose to 93 percent, and internet access reached 47 percent of the population. However, while the telecommunications industry remains pivotal to the service sector’s development, signs of weakening domestic demand are likely to dampen its growth prospects in the short-term.
Herderschee said while there is expected to be continued growth in the services sector, growth of industry is expected to remain stagnant. He added that growth in agriculture will also be subdued due to the El Nino-induced drought.
“Insufficient rainfall and the depreciation of the South African rand against the US dollar will contribute to Zimbabwe’s slowing growth rate.
“While the growth of services remained strong through 2015, agriculture and industry are highly susceptible to shocks. The disruption of irrigation networks and input value chains caused by the FTLRP greatly increased the vulnerability of agricultural production. Rainfall is also critical to Zimbabwe’s water utilities and hydroelectric power subsector. Power, water and agriculture all have direct implications on poverty trends.”
However, Finance and Economic Development Minister Patrick Chinamasa maintained the 2.7% growth target for 2016 on the back of concerted efforts the Government was making to stimulate the productive sectors.
“I do not think the 1.5% growth (projection) is correct,” he said, adding: “We are not sleeping trying to make the productive sectors work.”
“The 2.7% economic growth target we set will be achieved this year. Sectors such as mining, agriculture and manufacturing will play their part in the growth matrix,” he said.
Chinamasa said as a country there is need for concerted efforts to address the economic challenges.
“For now we have good relations on policies and what remains is consistency and we are happy all is now in direction,” he said.
Chinamasa said while the country has also made progress on the Lima commitment on debt clearance strategy, he is looking forward to softer loans from the World Bank to curtail liquidity for investment capital.
While the World Bank said low investment would also impact on overall economic output, Chinamasa said efforts were on-going to improve the environment.
“It is not an event but a process. Any issues that demean the attractiveness will be addressed,” he said, while calling on investors to speak out on issues they have reservations about.
Chinamasa said the Zimbabwean economy was resilient as a number of people had long predicted its demise, which never came to pass.
“Everyone who has commented on Zimbabwe has said we should be finished by now. Even when I was appointed as Finance Minister they said the economy would be on its knees,” he said.
In terms of investments, Herderschee expects overall investment to remain at 13% of GDP in 2016 with subdued public and private investment.
He said rising consumption financed in part by capital inflows had underpinned Zimbabwe’s recent growth. The low rates of investment are a result of high capital costs, electricity shortages, labour market rigidities and external pressures.
Herderschee however said major changes in Zimbabwean labour laws bode well for labour market flexibility, while measures to reduce or remove other important impediments to foreign investment are currently under consideration,” he said.
World Bank country director for Zimbabwe Guang Chen said to raise growth from its current medium term trend of 2.3%, Zimbabwe will need to correct key macro-economic balances. He said recent growth has been largely driven by consumption, and both public and private investment has fallen since 2011.
The WB’s first edition of its Zimbabwe Economic Update (ZEU) aims to provide a new perspective on the macroeconomics issues facing the nation and focusses on key developments in a particular sector.
Contributing during a panel discussion, Nicoz Diamond managing director Grace Muradzikwa said the services sector will not continue to grow alone while other economic sectors are retreating. She said the sectors need to co-ordinate which is key to their inclusive growth.
Jimmy Psillos, chairman of the CZI Banking cluster said Zimbabwe’s economy had shown signs of resilience and achieved growth during a period where commodity prices and regional currencies are falling. He said significant progress has been made on the doing business environment and labour issues. “What is left is good corporate governance.” FinX
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