Economic growth to slow down

Kudzanai Gerede
THE Ministry of Finance and Economic Development has revised downwards the country’s 2016 economic growth projection targets which had earlier been pegged at 2,7 percent hoping the economy to grow by a marginal 1,4 percent owing to catastrophic agriculture sector performance as a result of prolonged dry spells which characterised the farming season across the country.

In his 2016 National Budget presentation in late November, Finance and Economic Development Minister, Cde Patrick Chinamasa set the country’s growth for 2016 at 2,7 percent on account of mining, agriculture, tourism, construction and financial sectors.

Specific to the agricultural sector, the Minister outlined that the sector would grow by 1,8 percent through adequate planning to mitigate the impact of the El-Nino weather, but evidence in the first quarter already show poor harvests hence a steep decline on expected output.

Addressing mining and agriculture stakeholders in Harare last week at the inaugural Minex Conference organised by Buy Zimbabwe, acting director of Fiscal Policy in the Ministry of Finance and Economic Development, Mr Jonah Mushayi, said due to a sharp decline in the agriculture sector the ministry has revised its initial growth projection to 1,4 percent combined with a general slowdown in other sectors of the economy.

“As you may have realised we have had a massive decline in the agriculture sector due to poor rainfall and the ministry has revised the growth projections to 1,4 percent from the initial 2,7 percent,” said Mr Mushayi.

“We, however, expect the mining sector to buffer the poor agriculture performance despite the low prices currently being witnessed.

“Mining contributed an average of 13 percent to GDP between 2010 and 2015 and in 2016 we expecting mining to register growth of 14,9 percent, the highest increase than any other sector,” he added.

The mining sector is expected to be buoyed by the reinvigoration taking place in its diamond subsector that comes at a time when diamond output and contribution had dwindled in the past few years.

Zimbabwe is believed to have lost billions of dollars from its diamond fields owing to lack of transparency by the erstwhile joint venture companies operating in Chiadzwa in the past 9 years.

The formation of the Zimbabwe Consolidated Diamond Company is expected to be more transparent and proceeds will see revamping of the sector.

Analysts have, however, highlighted the continuation of depressed mineral prices as a threat to achieving the latest growth targets.

Gold prices further dropped this past Monday and warned of the volatility in mineral prices not to guarantee the country’s long term growth forecast.

“The rebound is not quite encouraging to be frank as most critical sectors of the economy are currently not performing to substantial standards, the manufacturing sector for instance feeds on raw materials coming from agricultural raw materials which has been badly hit by the El-Nino induced drought,” noted Mr Pepukai Chivore.

“The revision of the growth targets downwards is commendable and a fair assessment so that we can make appropriate and well informed policies taking note of this marginal target,” he added.

Among a plethora of challenges slowing down the economy, the liquidity challenges remain a bottleneck towards smooth flowing of businesses in the country and its ultimate growth.

This has resulted in high cost of borrowing with interest rates sky rocketing to highs of 20-30 percent from Micro-Finance Institutions due to high demand and scarcity of cash.

During the months of November and February, the country’s banks ran out of cash as a result of huge demand and the Reserve Bank of Zimbabwe had to import foreign currency which is a short-term measure.

However the 1,4 percent projection is expected to be sustained by the emerging services sector which according to latest figures, the services sector contributed just above 60 percent to treasury in the previous financial year buoyed by the rebound in the tourism sector which has since surpassed traditional top performers in mining, agriculture and manufacturing.

“We are expecting growth from the services sector to maybe instill a bit of confidence and resilience in the economy especially in the tourism sector which posted significant amounts to treasury last year.

“We are also expecting considerable growth from the ICT sector to compliment national development as it is doing well,” added Mr Chivore.