Zimbabwe Has Great Potential for Sustained Growth

Scale of Zimbabwe tobacco exports. The Southern African state is a major producer of the crop., a photo by Pan-African News Wire File Photos on Flickr.

WB upbeat on Zim

Wednesday, 03 July 2013 00:00
Senior Business Reporter

THE Zimbabwean economy, which has registered a 25,2 percent growth since 2009, wields great potential for sustained growth and poverty reduction, the World Bank has said.

The multilateral lender said this in a report for its interim strategy note designed for Zimbabwe covering the period 2013-2015.

Through ISN the bank seeks to help rejuvenate tiring economic growth by fostering private sector-led growth, strengthening core systems of public sector management, reducing vulnerabilities and supporting human development.

But the growth is now under serious threat from lack of competitiveness due to old equipment, high cost of utilities (power, water), elusive capital, high cost of funding and labour, the report said.

“Despite the current difficulties, Zimbabwe has great potential for sustained growth and poverty reduction and the economy could bounce back quickly,” the World Bank said.

Unsustainable debt, at US$10,7 billion, is also hindering access to funding from international financial institutions including the International Monetary Fund, World Bank, African Development Bank and European Investment Bank.

However, regardless of these weigh down factors the Washington-based global lender, which last lent to Zimbabwe in 2009, contends the country can sustain its growth.

This confidence followed major improvements since 2009 that include growth in industrial capacity from 10 percent in 2008 to 57 percent in 2011 and 45 percent in 2012. Revenue rose to US$3,5 billion in 2012 from just US$970 million in 2009.

Further, inflation fell from 231 million percent in July 2008 to less than 3,5 percent in 2012 while investment has grown by over 142 percent to about 11 percent of the estimated US$10 billion GDP.

The Bretton Woods institution also cited favourable economic endowments (water, land), mineral resources, hydro-power potential, diverse industrial base, skilled personnel and stable neighbours as factors that could anchor Zimbabwe’s growth.

Its assertion was also based on Zimbabwe’s strategic position in the region, trunk roads and transmission lines still in good condition, citizens in the Diaspora and tourism potential.

The bank said Zimbabwe’s gross domestic product has averaged 7,8 percent annual growth since 2009, adding the economy has entered a period of recovery and was set for growth.

This contrasts sharply with the decade to 2008 when the country’s GDP was estimated to have contracted by 50 percent.

Zimbabwe’s economic recovery between 2009 and 2011 was underpinned by mining (35 percent) and agriculture (16 percent).

While the growth looked bright since 2009 after dollarisation of the economy and short-term recovery policies that Government adopted, growth is now appearing to lose steam.

Economic growth for 2013 is forecast to decline to 5 percent this year from 5,4 percent last year and 9,3 percent in 2011. Some analysts believe that Zimbabwe has exhausted major driving factors that sustained growth at dollarisation in 2009.

To bring about fresh impetus for growth the World Bank believes there is need to create an environment conducive to support it.

As such, the bank will focus its ISN on building new or additional capacity in industry and agriculture, public finance management, infrastructure, human skills development, service delivery, debt control and investment promotion among others.