Zimbabwe Economic Outlook

  • In 2016, Zimbabwe’s growth more than halved to 0.5% from 1.1% in 2015. The government responded to the challenging environment by instituting a raft of measures including a temporary ban on imports, issuance of bond notes and introduction of a command agriculture system.
  • Zimbabwe’s GDP growth is projected to increase by 1.3% in 2017 spurred mainly by agriculture in view of favourable rains, tourism, manufacturing, construction and financial sectors.
  • Stimulating entrepreneurship and industrialisation will require deep reforms to improve the business environment and promote employment creation.

Zimbabwe’s gross domestic product (GDP) growth declined from 1.1% in 2015 to an estimated 0.5% in 2016. It is projected to increase by 1.3% in 2017 with the agriculture, tourism, manufacturing, construction and financial sectors all expected to improve. In particular, the country received above normal rainfall which is a major boost for the economy. The poor performance of government revenues against a background of high recurrent expenditure led to a large fiscal deficit. The fiscal deficit for 2016 is estimated at USD 1.042 billion (7.3% of GDP), against a target of USD 150 million. The economy also continues to experience shortages in foreign currency required to fund critical inputs in most sectors of the economy and the high cost of production which has eroded competitiveness.

According to the Zimbabwe National Statistics Agency (ZIMSTAT), the annual inflation rate stood at -2.19% in January 2016 and -0.93% at the end of the year. The estimated average annual inflation for 2016 is -1.5%, up from -2.4% in 2015. The removal of some goods from the Open General Import Licence in June 2016 coupled with a decline in agricultural production owing to drought has pushed up prices. Zimbabwe emerged out of deflation in February 2017 with annual monthly inflation at 0.06% after gaining 0.71 percentage points on the January rate. Inflation is expected to remain positive in 2017, hovering between 1% to 2%, on the back of an anticipated increase in international oil prices and economic recovery. The external position is projected to remain under severe pressure in the medium term because of weak exports.

According to the 2017 Monetary Policy Statement, merchandise exports amounted to USD 3 365.8 million in 2016 representing a 6.9% decline from the USD 3 614.2 million recorded in 2015. Exports in 2016 were dominated by minerals (gold, nickel, platinum, and diamonds) and tobacco. Tobacco remains a major source of export earnings with the Tobacco Industry Marketing Board (TIMB) registering sales of 202 million kilograms (kg) of tobacco as at 12 September 2016, up from 198.9 million kg in 2015. Total sales amounted to USD 593 million at an average price of USD 2.94 per kg. In 2015, the total sales were USD 586.4 million, at an average price of USD 3 per kg. The major export destinations are South Africa, United Arab Emirates, Mozambique, Botswana and Zambia.

Merchandise imports on the other hand declined by 11.7% from USD 6 062.3 million in 2015 to USD 5 350.9 million in 2016. This is mainly because of the Statutory Instrument 64 ban on certain commodity imports. Imports were dominated by diesel, unleaded petrol, electrical energy, crude soya bean, rice, non-alcoholic beverages and medicines. Fuel accounted for 27.2% of the total merchandise imports while food accounted for 11.8%. The top source countries included: South Africa, Singapore, China, India, Mozambique, Japan, Botswana and United Arab Emirates.

The external sector still remains a threat to a strong recovery in the near term largely due to weak exports leading to an unsustainable trade deficit, although imports have been coming down.

The lack of fiscal space has undermined development expenditure and social services provision, exacerbating poverty in rural and urban areas. The Zimbabwe Poverty Atlas of 2015 by ZIMSTAT shows that poverty prevalence remains high throughout the country. It was highest in Matabeleland North (85.7%) and least prevalent in Harare (36.4%) and Bulawayo (37.2%). Other provinces had prevalence rates between 65% and 76%. According to ZIMSTAT in 2016, the poverty datum line averaged USD 478.90, slightly down from USD 491.26 in 2015.

The economy has experienced cash shortages owing to rising informality, fiscal revenue underperformance, declining capital inflows and export receipts, a high fiscal deficit and public indebtedness; external imbalances and capital flight. In order to alleviate cash shortages, the government introduced bond notes in November 2016 pegged at par to the US dollar. The introduction of bond notes initially created apprehension but they have been broadly accepted as a medium of exchange. Economic activity in the near term will depend to a large extent on how quickly measures instituted by the government will be implemented.