World Bank predicts 3,9% growth

ZIMBABWE'S economy will grow by 3,9% this year, underpinned by a good agricultural season and an inflationary slowdown, the World Bank (WB) predicted yesterday.

However the global lender warned that COVID-19-induced volatilities would continue to negatively impact economic activity, holding back employment growth and improved living standards.

The 3,9% growth falls short of a 7,4% rise projected by government. Government has also projected that annual inflation, estimated at 161,9% in May, would fall below 10% by year end, while yesterday's WB report placed the rate at 86%.

The latest report on Zimbabwe, released by a global financial institution, was made by the International Monetary Fund in April, which predicted that the economy would grow by 3,1%.

However, the WB said that while gross domestic product would rise, high inflation would remain a cause for concern.

"Gross Domestic Product (GDP) growth in Zimbabwe is projected to reach 3,9% in 2021, a significant improvement after a two-year recession," WB country manager Mukami Kariuki said in the report titled Zimbabwe Economic Update.

"Despite positive steps taken to stabilise prices, inflation is expected to remain significant in 2021, subduing efforts to stabilise and unify the exchange rate in the medium-term. Domestic demand is also projected to remain low as income remains subdued and limited flows of Foreign Direct Investment, influenced by export retention policies and other factors, are expected to keep productivity and competitiveness low in some sectors of the economy," the report added.

"Mitigating these risks requires domestic policies to strengthen and sustain macroeconomic stability which is critical for consolidating economic recovery. Recent efforts to stabilise prices through rule-based monetary and exchange rate policies have been effective and must be continued and expanded. Fiscal policies supportive of these efforts have thus focused on avoiding monetary financing and quasi-fiscal activities, reducing distortive subsidies, and improving fiscal and debt transparency."

The report said economic recovery was expected to strengthen further from 2022, with GDP growing by 5,1 % as the deployment of vaccines intensifies and implementation of the national development strategy bears fruit.

"Improving the country's growth prospects will require further attention to policies that strengthen the quality of service delivery in the social sectors. Preserving lives during an unprecedented time protects livelihoods, strengthens social protection, improves food security and ensures better education outcomes," the report said.

It noted that facing tight public finances and limited recourse to external financing, Zimbabwe would need to rely on reallocating domestic resources to optimal public uses and leveraging on private financing and humanitarian support where possible.

The bank highlighted that addressing underlying challenges in health, education, social protection and food security would require sustained financing, strengthened accountability frameworks and investments in appropriate management information systems.