News / National
Zimbabwe faces tough 2015
30 Dec 2014 at 08:17hrs | Views
HARARE - Zimbabweans face a 2015 as the country's economic prospects are likely to continue waning in the new year, economic analysts have warned.
This comes as a huge number of companies have shut down, with thousands losing jobs.
According to Treasury statistics, at least 4 160 companies have closed shop since 2011, sending over 55 443 employees into the streets.
Finance minister Patrick Chinamasa has also been forced to lower 2014's gross domestic product (GDP) growth projections from an initial 6,1 percent to 3,1 percent.
He predicted a 3,2 percent GDP growth for 2015, indicating the economy would be stagnant in the new year.
Between 2009 and 2012 - during the period of the coalition government between President Robert Mugabe's Zanu PF and Morgan Tsvangirai's MDC - Zimbabwe's GDP growth averaged ten percent.
Tony Hawkins, an economist, said given the current deteriorating economic situation "it was naive to believe that the country can borrow itself out of trouble or that foreign investors will suddenly ride to the country's rescue".
"The longer term problems of excessive consumption, inadequate savings and investment, huge reliance on foreign borrowing, unsustainable balance-of-payments and foreign debt situations, not to mention growing unemployment and poverty are being left to fester and worsen in the hope that somehow conditions will improve in 2015," he said.
Hawkins added that with the global economic situation deteriorating, commodity prices, on which Zimbabwe is massively dependent, are forecast to stagnate and risk aversion towards investment in emerging markets is growing.
He noted that in a slowing economy, there was very little fiscal space to raise additional revenue on a continuing basis, though Zimbabwe Revenue Authority (Zimra) is currently raising additional funds through collections of arrears and penalties despite them being one-off measures that cannot be repeated.
"Higher import duties are self-defeating in the sense that if they choke off import demand, as intended, very little revenue is raised.
"At the same time, they create problems with other Sadc or Comesa member states while also fuelling duty evasion and corruption giving rise to additional government spending designed to curb such evasion," he said.
Hawkins noted that in a country where two-thirds of the population lived in poverty such measures were socially undesirable.
John Robertson, also an economist, said for Zimbabwe to realise meaningful economic growth, investment is needed and this called for investor confidence first.
"Before confidence can be restored, the security issues must be addressed, and these concern civil rights, property rights, the rule of law and the adoption, by politicians, of policies designed to assist and encourage investors, rather than to regulate and control them," he said.
This comes as Chinamasa's $4,1 billion 2015 national budget funding is under threat as government continues to miss revenue targets.
Government is currently running on a cash budget after failing to secure external support, but tax income is dwindling on the back of waning economic activity.
According to tax collector Zimra's latest statistics, net revenue collections in the third quarter to September 2014 amounted to $884,5 million, missing a $972,3 million target by nine percent.
Last year, Zimra collected a total $3,4 billion in tax receipts, six percent short of a $3,6 billion target.
As at August 31, 2014, government suffered a budget deficit of about $20 million, as revenue collections were 6,3 percent below target.
Chinamasa conceded that the economy was in bad shape and called for various reforms aimed at stimulating production in various economic sectors.
"The major challenge is that the revenue base remains limited, and hence, the need to expand it," he said.
"The economy needs substantial investment, both domestic and foreign direct investment, as well as other support, also targeting infrastructure and production for the export markets. The economy continues to be dragged down by liquidity shortages, antiquated plant and machinery, cheap imports and high cost of production — a situation that has led to company closures," he said.
This comes as a huge number of companies have shut down, with thousands losing jobs.
According to Treasury statistics, at least 4 160 companies have closed shop since 2011, sending over 55 443 employees into the streets.
Finance minister Patrick Chinamasa has also been forced to lower 2014's gross domestic product (GDP) growth projections from an initial 6,1 percent to 3,1 percent.
He predicted a 3,2 percent GDP growth for 2015, indicating the economy would be stagnant in the new year.
Between 2009 and 2012 - during the period of the coalition government between President Robert Mugabe's Zanu PF and Morgan Tsvangirai's MDC - Zimbabwe's GDP growth averaged ten percent.
Tony Hawkins, an economist, said given the current deteriorating economic situation "it was naive to believe that the country can borrow itself out of trouble or that foreign investors will suddenly ride to the country's rescue".
"The longer term problems of excessive consumption, inadequate savings and investment, huge reliance on foreign borrowing, unsustainable balance-of-payments and foreign debt situations, not to mention growing unemployment and poverty are being left to fester and worsen in the hope that somehow conditions will improve in 2015," he said.
Hawkins added that with the global economic situation deteriorating, commodity prices, on which Zimbabwe is massively dependent, are forecast to stagnate and risk aversion towards investment in emerging markets is growing.
He noted that in a slowing economy, there was very little fiscal space to raise additional revenue on a continuing basis, though Zimbabwe Revenue Authority (Zimra) is currently raising additional funds through collections of arrears and penalties despite them being one-off measures that cannot be repeated.
"Higher import duties are self-defeating in the sense that if they choke off import demand, as intended, very little revenue is raised.
"At the same time, they create problems with other Sadc or Comesa member states while also fuelling duty evasion and corruption giving rise to additional government spending designed to curb such evasion," he said.
Hawkins noted that in a country where two-thirds of the population lived in poverty such measures were socially undesirable.
John Robertson, also an economist, said for Zimbabwe to realise meaningful economic growth, investment is needed and this called for investor confidence first.
"Before confidence can be restored, the security issues must be addressed, and these concern civil rights, property rights, the rule of law and the adoption, by politicians, of policies designed to assist and encourage investors, rather than to regulate and control them," he said.
This comes as Chinamasa's $4,1 billion 2015 national budget funding is under threat as government continues to miss revenue targets.
Government is currently running on a cash budget after failing to secure external support, but tax income is dwindling on the back of waning economic activity.
According to tax collector Zimra's latest statistics, net revenue collections in the third quarter to September 2014 amounted to $884,5 million, missing a $972,3 million target by nine percent.
Last year, Zimra collected a total $3,4 billion in tax receipts, six percent short of a $3,6 billion target.
As at August 31, 2014, government suffered a budget deficit of about $20 million, as revenue collections were 6,3 percent below target.
Chinamasa conceded that the economy was in bad shape and called for various reforms aimed at stimulating production in various economic sectors.
"The major challenge is that the revenue base remains limited, and hence, the need to expand it," he said.
"The economy needs substantial investment, both domestic and foreign direct investment, as well as other support, also targeting infrastructure and production for the export markets. The economy continues to be dragged down by liquidity shortages, antiquated plant and machinery, cheap imports and high cost of production — a situation that has led to company closures," he said.
Source - DailyNews
