Economic analysts predict low growth for 2022

Chris Mahove

The country’s economic growth is expected to slow down a bit as a result of the Russia -Ukraine conflict, which has seen some Western countries imposing sanctions on the former.

Zimbabwe has been receiving a lot of investments from Russia and the sanctions imposed on that country have had a negative impact on the economy of the Southern African country.

Economic analyst Prosper Chihtambara said the biggest threat to Zimbabwe’s economic growth this year was the Russia-Ukraine conflict, noting that since the beginning of the crisis, the country’s economy had experienced  a lot of inflationary pressures.

Prosper Chitambara

The conflict has affected the global supply chains and production in commodities such as wheat and crude oil, of which Russia is one of the biggest producers globally.

“This year’s growth will be much lower than it was last year;  we dont know how soon the Russia -Ukraine crisis is going to end but it will have a bearing on global inflation and local inflaion which will ultimately affect local growth. Economic growth will be affected by investment inflows to Zimbabwe because we have been receiving  a lot of investments from Russia,” Chitambara .

Chitambara said both monthly and annual inflation had increased, with annual inflation rising from 60.61 percent to 66.1 percent, while monthly inflation rose to 7 percent from 5.34 percent.

“So the first quarter has been a bit challenging and has affected the ordinary citizens and the working class (although) there has been a slight improvcement in terms of the narrowing of the foreign exchange premium on account of the movements that we have seen on the official market,” he said.

Chitambara said there is need for more liberalisation of the foreign exchange market to allow the dynamic market forces to have a greater leverage and leeway in terms of the exchange rate, noting howeever, that although the premium had remained stable, there was  still work that needed  to be done to ensure there greater stability and confidence in the foreign exchange market.

Another economist, Collen Jonasi, concurred, noting that the failure by the parallel rate and the official rate to come into convergence was the first indicator that the economy was not in good shape.

“The official exchange rate  continues to be artificially lowered down by the Central Bank whilst the parallel market exchange rate is indicating the actual issues of demand and supply of the USD vis-a-vis our own currency. So as long as there are still those wide discrepancies between the two exchange rates, we are not even doing well at all. I feel that the RBZ should try to liberalize its exchange rate. It has to reflect the true demand and supply in as far as the greenback is concerned,” he said.

Jonasi said government should immediately address the issue of the exchange rate, noting that the Zimdollar continued to lose value against the USD as reflected by the alternative rate.

The economist noted that people’s earnings continued to be eroded by the ever rising inflation, adding there was need for an effective monetary policy that will ensure the presence of the fundamentals that allow the government to deal with inflation.

“Now with the first quarter of the year coming to an end, there is no hope that the government is going to rein in inflation rate so there still ramains a lot that needs to be done because we are actually in a runaway inflation if the governments fails to address that.

This, he said, had resulted in challenges in the formal labour market where workers continued to  push for payment of their salaries in USD and continued going back to the negotiating table where they try to have their wages reviewed from time to time.

“Therefore for me, the government should sit down and look at the key macro-economic fundamentals , issues to do with wages, issues to do with prices, issues to do with inflation,  exchange rates, currency issues, those are the issues that need to be addressed. And it being the end of the first quarter, things should be taking shape, so that at least people can have confidence in the economy,” he said.

Victor Boroma, another economic analyst, said the economy had more or less continued on a 2021 trajectory, adding the export side has been positive .

“There is relative stability for prices despite the increase in annual inflation to 66 percent . The country is doing well in terms of exports with significant increase in export earnings month on month in Q1,” he said.

Boroma also expressed concern over the “manipulation” of the foreign exchange market by the Reserve Bank of Zimbabwe, saying this would affect money supply growth and stoke inflation.

The Central Bank remains the sole supplier of foreign currency on the auction allocation platform and has allocated USD 2, 887 billion since the inception of the auction in June 2020.

This year a total of USD290 million has been allocated for the importation of various commodities and payment of offshore services.

The country now needs USD650 million per month to make foreign currency payments for imports and other services payments, according to Boroma.

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