Key risks remain a threat to any prospects for even a small increase in Zimbabwe’s economic growth, an international research body has said.
BY DONALD CHIDOORI
A recent Business Monitor International (BMI) report said that the army worm was a threat to food security in the country and could dampen the bumper harvests euphoria.
“Harvests could be hurt by the impact of an army worm outbreak in seven out of eight maize producing regions and the volatility of the regional climate means future output will be far from stable,” the September 2017 report read.
The Food and Agricultural Organisation (FAO) early this year warned that the army worm which has ravaged other countries in the region causing considerable crop damage to maize as well as other cereals including sorghum, millet and wheat; were a threat to food security in the country.
BMI also warned that the planned introduction of US$300 million bond notes into the market could fuel hyper inflation.
“Other risks are posed by the possible over-expansion of the government’s bond note programme. Inflation remains at manageable levels at current rates of bond note issuance, but with no apparent checks on the printing of the notes and rumours that the government has already broken its self-imposed USD200 million limit, there are risks that prices could begin to grow at a more rapid pace.”
The BMI risk report also highlighted that heightened political risk would limit any prospects of the economy recovering and that development projects would be sidelined for funding the security forces in anticipation of political violence.
Since the year 2000 Zimbabwean elections have been marred by political violence. In the 2008 harmonized elections alone the death toll neared 800 as post-election violence spiraled out of control.
“Any increase in government revenues that follow from the slight recovery we expect in 2017 and 2018 will likely be focused on maintaining the support of the country’s military and police during what we believe will be a period of heightened unrest in the approach to the 2018 general election, rather than on more productive ventures.”
“Most notably, much-needed investment into the economy will remain low on the back of the government’s constrained fiscal position and elevated levels of political risk in the approach to the 2018 election.”
Meanwhile BMI expects economic activity to return to positive growth in Zimbabwe in 2017 as improving weather conditions facilitate stronger harvests in the agriculture sector.
“Our Agribusiness team forecasts corn production to increase by 50.0% in 2017, having contracted by 46.2% and 28.6% in 2015 and 2016 respectively. Similarly, tobacco (a key cash crop in Zimbabwe) is set for something of a recovery after drought saw output decline by 10.1% in 2016.”
“With inflation moving back into positive territory in February for the first time since 2014. As a result, we expect growth to reach 0.6% in 2017, after posting an estimated 1.8% recession in 2017.”
BMI however, warned that growth will remain low on the back of constrained monetary and fiscal policy and substantial risks facing the country.