Mnangagwa’s Rise will offer a boost to investor sentiment, but this will not feed through into headline growth figures until 2019 when the country’s political outlook is more certain.
by Donald Tafadzwa Chidoori
The latest BMI report indicates that Zimbabwe’s economy will fall back into recession over 2018, hamstrung by the ongoing lack of hard currency.
According to the report Zimbabwe’s economy will likely sink back into a recession in 2018 as the ongoing liquidity crisis continues to weigh on production in import-dependent sectors.
“The lack of monetary liquidity in circulation will continue to weigh on economic activity, informing our forecast for the economy to contract by 1.5% in 2018, before growing by 3.0% the following year as foreign investment begins flowing into the cash-strapped economy,”
The coming into power of Emmerson Mnangawgwa had given sum glimmer of hope to many Zimbabweans.
Since dollarising the economy in 2009, a lack of inward investment has meant years of deep current account deficits have been financed with reserves of hard cash intended for day-to-day domestic transactions. In this environment, businesses and consumers have found it increasingly difficult to access the hard currency needed to buy goods and services, particularly those imported from abroad, weighing on economic activity.
The coming into power of a more compromising leader in the form of Mnangwagwa has seen the country attracting investor interest with yesterday’s Herald reporting that Zimbabwe had attracted over $3 billion foreign direct investment (FDI) in the past seven weeks.
However, according to the latest BMI report, benefits from such interests would only come in 2019 when the country’s political outlook is more certain.
Zimbabwe is expected to have elections in July this year and no one is sure about the political outlook after the elections. And without some evidence that President Mnangagwa is delivering reforms, him being in power alone will not be sufficient to attract significant foreign capital the report says.
“While the ouster of long-serving President Robert Mugabe and appointment of the more reform-minded President Emmerson Mnangagwa offers hope of more sustainable economic growth going forward, we do not expect any benefits to fully materialise until 2019.
“While investor appetite is likely to have piqued in response to the appointment of a more reform-minded president, we do not believe this will be sufficient to attract significant foreign capital without some evidence that President Mnangagwa is delivering reforms,” the report said.
The report said that for there to be substantial growth in 2018 and for the country to solve the liquidity crisis there is need for substantial inward investment or a sudden surge in exports.
BMI also expects to see the Current Account Deficit to remain constrained in 2018.