ZiG uncertainties to frustrate GDP forecasts

Zimbabwe's economic growth prospects are facing serious challenges due to liquidity shortages and a severe drought, according to leading advisory firms and economists.

In a recent mid-term budget review, Finance Minister Mthuli Ncube revised the GDP growth target down from 3.5% to 2% for 2024, citing factors such as the drought, volatile commodity prices, and power cuts.

Experts highlight that the agricultural sector, which is expected to decline by 21% this year due to poor rainfall, will significantly impact overall growth. Economists like Chenayimoyo Mutambasere and Respect Gwenzi have expressed concerns about the feasibility of achieving the 2% growth target given these conditions.

Stephenson Dhlamini pointed out issues with Zimbabwe's new gold-backed currency, ZiG, including liquidity problems and currency volatility, which have led to a preference for holding US dollars. Additionally, the country's rising debt, now at US$21 billion, remains a critical issue. Dhlamini and others called for a clearer debt management strategy.

Economist Prosper Chitambara noted that the mid-term review took a cautious approach, focusing on stability and gradual reforms rather than major changes. Despite concerns about growing local debt, the review did not propose new measures or a supplementary budget, leaving some experts questioning the adequacy of the government's response to the economic challenges.