Zimbabwe to contract by 1.5% in 2018

Published: 08 February 2018

UK-based research firm-BMI Research, which is part of the Fitch Group, has forecasted bearish economic prospects for Zimbabwe this year as the ongoing liquidity crunch continue to weigh on production in import-dependent sectors.

In its February economic outlook on Zimbabwe, BMI Research opined that benefits of the country's new administration would not materialize in 2018, further forecasting the economy to contract by 1.5% this year.

"Zimbabwe's economy will fall back into recession over 2018, hamstrung by the ongoing lack of hard currency. While the appointment of a more reform-minded president will offer a boost to investor sentiment, this will not feed through into headline growth figures until 2019 when the country's political outlook is more certain. Zimbabwe's economy will likely sink back into a recession in 2018 as the ongoing liquidity crisis continues to weigh on production in import-dependent sectors," reads BMI report.

"Until they do, the lack of monetary liquidity in circulation will continue to weigh on economic activity, informing our forecast for the economy to contract by 1.5% in 2018, before growing by 3% the following year as foreign investment begins flowing into the cash-strapped economy. The lack of monetary liquidity in Zimbabwe will continue to undermine prospects for economic growth over 2018," said BMI.

"Since dollarizing the economy in 2009, a lack of inward investment has meant years of deep current account deficits have been financed with reserves of hard cash intended for day-to-day domestic transactions," adds the report.

BMI says the ouster of former President Robert Mugabe and appointment of President Mnangagwa offered hope for sustainable economic growth going forward; but highlighted that it was ambitious to expect quick economic recovery for an economy that has been struggling for decades.

The coup government led by President Emmerson Mnangagwa has bullish outlook and projecting a 4.5% growth, with Finance and Economic Planning Minister Patrick Chinamasa being optimistic that Zimbabwe can actually attain a 6% growth this year.

- online

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