Mixed reactions over projected GDP growth rate
BUSINESS REPORTER
Multiple economists have expressed mixed reactions over the revised economic growth rate of 2% from 3.5% amid uncertainties in the operating environment
The Treasury said El Nino induced drought was a major blow to the country’s economic growth following agriculture’s importance to the Gross Domestic Product (GDP) growth.
Finance, Economic Development and Investment Promotion minister Professor Mthuli Ncube believes if wheat output could be achieved as earlier predicted, the country could surpass the 2% growth rate.
Economist Vince Musewe told this publication that there are too many challenges for the economy to achieve that target.
“An economy with cash shortages, inconsistent power, lack of major investment in productive capacity will not grow significantly. Add drought to that and high levels of unproductivity coupled with rampant corruption means that economic growth is a pipe dream. We can do better,” Musewe said.
Another economist, Professor Gift Mugano said the projected growth rate would be a surprise if the country achieves it.
“The 2% growth target which has been projected by the government, I still feel that it’s quite ambitious because of the effects of the shocks that are coming from drought and external shocks from the effects of declining international commodity prices which is affecting us. So I will be surprised if we reach that growth rate this year.
The chances of us getting into recession are high due to declining aggregate demand and capacity utilisation is going down due to a myriad of challenges,” Prof Mugano said.
He said businesses are not selling enough and there are delays in payments emanating from failure to access foreign currency.
Economist Malone Gwadu concurred with the aforementioned economists.
“I think the 2% economic growth projection adjustment is just but a reflection of the economic realities we are facing, these include reduced national output we are faced with as a country due to El Niño effect which had a effect on our agriculture sector output and depressed global commodity prices particularly Platinum Group of Metals and lithium.
We are a commodity based economy and any hits on our commodities of produce have a direct and downstream effect on our economy. So the 2% economic growth projection is probably a nudge into a more realistic projection however a lot of variables both indigenous and exogenous will be determinants in attaining this,” Gwadu said.
This downward revision, the Treasury said, is mainly attributed to a more severe than expected impact of the El Nino induced drought on agriculture output.
The 2% growth projection is however subjected to upside potential as winter wheat output could be higher than projected.
This would reduce the contraction of the agriculture sector and ultimately improve the overall economic growth for this year.
Economist Tinashe Kaduwo said indications are that the El Nino induced drought had a more devastating impact on the agriculture sector.
“However, growth may be higher emanating from a successful winter cropping season and huge growth in government-led spending in the construction sector and growing spending in the tourism sectors,”he said.
Businesses are pessimistic about the economic growth following power challenges and other myriad of challenges.
“Power challenges persist and will continue to dress down productivity across major sectors of the economy due to low water levels at Lake Kariba. The growth outlook amidst the risk factors calls for the government in partnership with key stakeholders to increase the allocation of resources toward social protection, capital expenditure towards the agriculture sector, and enhancing productivity across all sectors,” the Zimbabwe National Chamber of Commerce (ZNCC) president Tapiwa Karoro said.
He said the private sector has taken up the mandate to lead the financing of farming activities and the focus is on increasing the output of the winter wheat crop and other resilient crops to mitigate the effects of drought.
“Investing in irrigation infrastructure and providing support to farmers can help stabilise agricultural production. There is a need to reduce dependency on commodity exports by promoting value addition in mining and agriculture will be beneficial in the long-term. At ZNCC, we are encouraging the development of industries that can thrive in a de-carbonising world in line with our 2024 theme,” he said.
According to economic analyst Victor Boroma the government prediction is realistic.
“I think 2% is fair and in tandem with the impact of the envisaged drought. Considering that the World Bank and African Development Bank have projected 3.3% and 2% respectively. The economy is still heavily reliant on rain fed agriculture and the contribution of agriculture to industry is quite high in terms of food processing.
The drought will also take a huge knock on electricity generation at Kariba dam which currently produces over 40% of the country’s power output if normal rains are received.
It will also dent consumption of various other goods and services in the economy as households focus more on food security. Shortages will significantly increase food imports and imported inflation,” Boroma said.