Business / Economy
'Economic growth projections too optimistic,' govt warned
06 Dec 2015 at 08:16hrs | Views
Economists have warned that Government's economic growth forecast for 2016 may be too optimistic as the fall in commodity prices on the international market is likely to affect Zimbabwe's earnings.
Finance and Economic Development Minister Patrick Chinamasa projected a 2,7 percent Gross Domestic Product (GDP) growth next year, which is based on strong productivity mainly in mining, tourism and construction.
This year, the economy was expected to grow 1,5 percent, down from the original 3,2 percent growth estimates.
The mining sector is expected to grow by 1,6 percent in 2016 driven by gold production as a result of policy measures that have been undertaken in the last couple of years.
Exports are projected to increase to US$3,7 billion in 2016, up from US$3,4 billion projected in 2015.
This is on account of the expected improved performance of minerals; especially gold, nickel, diamonds and chrome.
Agriculture, driven by tobacco and horticultural produce, is also expected to push up the GDP.
But economists say the fall in commodity prices on the international market is not yet over, and even if Zimbabwe exported more minerals in 2016, earnings would still remain low due to that.
Economists also say with a projected poor agricultural output due to bad weather, economic growth is expected to be stunted.
The agriculture sector is expected to recover by 1,8 percent and Minister Chinamasa called for adequate planning to mitigate the impact of El-Nino.
Stock brokers IH Securities contend the external positions remain vulnerable with a wide current account deficit projected at US$2,59 billion for 2015.
China, which is the biggest consumer of Zimbabwe's extractive industry output, has been experiencing a slowdown in its economy, thereby hurting economies that are anchored on mineral exports.
"We believe the growth forecast of 2,7 percent is optimistic since international commodity prices are set to remain weak in 2016 and the anticipated impact of the El-Nino on the agriculture sector," said the brokerage firm.
"The fiscus remains under pressure, largely due to the unsustainable wage bill and revenue shortfalls as the economy remain subdued, thus crowding out capital projects."
Zimbabwe National Chamber of Commerce (ZNCC) chief executive, Mr Takunda Mugaga noted that key sectors of the economy are hamstrung by funding constraints, a situation he said could stifle the anticipated growth.
"Growth in 2016 is possible. However, we believe that it will not surpass more than 80 percent from the anticipated 2015 year-end level of 1,5 percent," said Mr Mugaga.
US$3,685 billion or an estimated 92.13 percent of the US$4 billion National Budget was allocated to recurrent expenditure with the remaining US$0.315 billion assigned to the development budget.
Analysts say that structure is not in sync with the expected rebound.
"The paltry allocation to the development budget remains a setback to mooted economic recovery," said EFE Securities, adding that the economy has operated with a constrained fiscal space since the inception of the multicurrency system.
This has been attributed to low revenues flowing into treasury and a bloated civil service.
However, Government has taken active steps in attracting foreign investment by improving the economy's ease and cost of doing business.
Other measures taken include the establishment and registration of the Zimbabwe Diamond Mining Corporation which will run the affairs of all diamond mines in the country, with the various diamond mining firms acquiring shares in the consolidated mining company in proportion to their net asset value.
This is expected to curb leakages through enhanced oversight, transparency and accountability
"We believe these steps will see the country receiving the much needed foreign investment in the short to medium term," said IH Securities.
The historic state visit by Chinese President Xi Jinping also saw Government and the world's second largest economy signing landmark deals worth over US$4 billion.
The investment deals cover different sectors of the economy and have brought a ray of hope for the Zimbabwean economy.
Finance and Economic Development Minister Patrick Chinamasa projected a 2,7 percent Gross Domestic Product (GDP) growth next year, which is based on strong productivity mainly in mining, tourism and construction.
This year, the economy was expected to grow 1,5 percent, down from the original 3,2 percent growth estimates.
The mining sector is expected to grow by 1,6 percent in 2016 driven by gold production as a result of policy measures that have been undertaken in the last couple of years.
Exports are projected to increase to US$3,7 billion in 2016, up from US$3,4 billion projected in 2015.
This is on account of the expected improved performance of minerals; especially gold, nickel, diamonds and chrome.
Agriculture, driven by tobacco and horticultural produce, is also expected to push up the GDP.
But economists say the fall in commodity prices on the international market is not yet over, and even if Zimbabwe exported more minerals in 2016, earnings would still remain low due to that.
Economists also say with a projected poor agricultural output due to bad weather, economic growth is expected to be stunted.
The agriculture sector is expected to recover by 1,8 percent and Minister Chinamasa called for adequate planning to mitigate the impact of El-Nino.
Stock brokers IH Securities contend the external positions remain vulnerable with a wide current account deficit projected at US$2,59 billion for 2015.
China, which is the biggest consumer of Zimbabwe's extractive industry output, has been experiencing a slowdown in its economy, thereby hurting economies that are anchored on mineral exports.
"We believe the growth forecast of 2,7 percent is optimistic since international commodity prices are set to remain weak in 2016 and the anticipated impact of the El-Nino on the agriculture sector," said the brokerage firm.
"The fiscus remains under pressure, largely due to the unsustainable wage bill and revenue shortfalls as the economy remain subdued, thus crowding out capital projects."
Zimbabwe National Chamber of Commerce (ZNCC) chief executive, Mr Takunda Mugaga noted that key sectors of the economy are hamstrung by funding constraints, a situation he said could stifle the anticipated growth.
"Growth in 2016 is possible. However, we believe that it will not surpass more than 80 percent from the anticipated 2015 year-end level of 1,5 percent," said Mr Mugaga.
US$3,685 billion or an estimated 92.13 percent of the US$4 billion National Budget was allocated to recurrent expenditure with the remaining US$0.315 billion assigned to the development budget.
Analysts say that structure is not in sync with the expected rebound.
"The paltry allocation to the development budget remains a setback to mooted economic recovery," said EFE Securities, adding that the economy has operated with a constrained fiscal space since the inception of the multicurrency system.
This has been attributed to low revenues flowing into treasury and a bloated civil service.
However, Government has taken active steps in attracting foreign investment by improving the economy's ease and cost of doing business.
Other measures taken include the establishment and registration of the Zimbabwe Diamond Mining Corporation which will run the affairs of all diamond mines in the country, with the various diamond mining firms acquiring shares in the consolidated mining company in proportion to their net asset value.
This is expected to curb leakages through enhanced oversight, transparency and accountability
"We believe these steps will see the country receiving the much needed foreign investment in the short to medium term," said IH Securities.
The historic state visit by Chinese President Xi Jinping also saw Government and the world's second largest economy signing landmark deals worth over US$4 billion.
The investment deals cover different sectors of the economy and have brought a ray of hope for the Zimbabwean economy.
Source - Sunday Mail
