The World Bank has predicted the economy will grow by 3 percent this year, marginally short of doubling the 1,8 percent expansion the global lender says was registered last year. According to its April economic briefing on Zimbabwe, the World Bank said growth would be dragged by headwinds from the global economy, low investment and week mineral prices.
Further, the multilateral lender contends that the after effects of the economic slowdown of last year will slow down growth.
It said the 2014 growth projections for Zimbabwe will be sensitive to the pace at which the Government moves to address macro-economic vulnerabilities and structural impediments to investment, international commodity prices and the coherency of policy responses.
“The global environment may affect the Zimbabwean economy through the stronger US dollar, lower global demand for key exports, weaker commodity prices and reduced capital inflows to developing countries,” the World Bank said.
Growth estimates by the multilateral lender contrast sharply with Finance and Economic Development Minister Patrick Chinamasa, that the economy will expand by 6,1 percent this year.
Presenting the 2014 budget Minister Chinamasa projected the economy will grow by 6,1 percent, driven by agriculture and mining, buoyed by policy initiatives under the Zimbabwe Agenda for Sustainable Socio-economic Transformation 2014/18.
He said the agricultural sector was this year anticipated to grow by nine percent on improved maize and cotton yields, while the mining sector was expected to expand by 11,4 percent. After a weak 2012-2013 season, agriculture is expected to rebound by 7,3 percent in 2014, largely supported by recovery in maize (to 1,2 million tonnes). The first crop assessment estimates 1,4 million hectares were planted to maize.
Tobacco production should confirm the positive results of the past season, although the increase in area planted is likely to be muted by weaker prices. Despite a reduction in hectarage, cotton production is expected to register an improvement in 2014, benefiting from improved yields and goods rains.
The World Bank said recovery in the mining sector remains muted, with expected 3,3 percent growth in 2014, saddled by lower international prices and subdued investment in the sector.
The multilateral lender predicted that the manufacturing sector will remain in lacklustre performance, at 1,4 percent in 2014, largely stifled by low investment, declining competitiveness pressures, and further tightening of credit conditions.
The Bretton Woods institution said the outlook is clouded by downside risks emanating from lower international prices of minerals, vulnerabilities in the banking sector, policy inconsistencies affecting investment, deflationary pressures, fiscal slippages and the unbalanced external position.
Total revenue continues to under-perform as inflows amounted to US$805 million, falling 8 percent short of target in the first 3 months of 2014.
Tax revenues fell 7,5 percent below expectations, sapped by under-performance of major taxes, an indication that the economy has been in decline of late.
The World Bank said growth in annual broad money edged up by 5,5 percent to reach US$4 billion in February 2014.
Private sector credit growth inched up 1,5 percent, reaching US$3,6 billion, but the banking sector remains vulnerable.
“Banking vulnerabilities remains high in the banking sector, exacerbated by macro-economic inconsistencies and low levels of confidence.”