11 October 2012

Zimbabwe: Zim Economic Growth to Slow Down - IMF

Photo: IRIN
Hope in Harare.

ZIMBABWE'S economic growth is expected to slow down to 4 percent by 2017, according to projections by the International Monetary Fund. In its recent World Economic Outlook report, the IMF said the Zimbabwean economy was expected to register a 5 percent Gross Domestic Product growth this year, with the figure anticipated to go up to 6 percent in 2013 before its slows down to 4 percent in 2017.

The WEO projection for the country this year at 5 percent is in line with the IMF Staff Report for the 2012 Article IV Consultations, which the IMF carried out in June, but slightly lower than Government projections of 5,6 percent.

That 5,6 percent figure is itself a downgrade from the initial 2012 growth projection of 9,4 percent on the back of declining performance in major sectors of the economy.

According to the IMF, key risks to the outlook for Zimbabwe include political instability, a decline in exports from a deeper global downturn, fiscal slippages, financial sector stress, and policy uncertainty.

The WEO presents the IMF analysis and projections of economic developments at the global level, in major country groups and in individual countries.

It focuses on major economic policy issues as well as on the analysis of economic developments and prospects.

At the continental level, Sub-Saharan Africa will this year experience lower-than-anticipated economic growth due to the impact of the eurozone crisis.

The African continent is particularly exposed to the eurozone crisis to the extent that Europe has traditionally been Africa's most important export destination and source of capital. To the extent that the region's economies are largely dependent on trade with the EU, observers contend that the impact of the eurozone crisis will be greater felt by the continent this year than in the previous two to three years.

This also specifically applies to Zimbabwe. The IMF has cut its 2012 forecast for Africa to 5 percent, attributing the downgrade to the eurozone crisis, which it said was dampening global demand and higher food prices weigh on food-importing countries in the region.

The IMF shaved its 2012 projections for Africa to 5 percent from 5,4 percent. However, it revised its 2013 outlook upwards to 5,7 percent from 5,3 percent.

The Fund said spillovers, from the eurozone crisis into Africa, have so far been modest except for South Africa, which has close financial and trading ties with Europe.

It has also cut its 2013 forecast for South African growth to 3 percent from a July projection of 3,3 percent mainly due to the impact from the continuing eurozone debt crisis. It maintained its 2012 projection of 2,6 percent.

"If the euro area crisis escalates further and global growth slows further, Sub-Saharan Africa's prospects will be less favourable.

"South Africa, strongly linked to Europe, would be particularly affected, with possible repercussions for some economies in southern Africa. Softer commodity prices would adversely affect the region's natural resource exporters," said the IMF.

The IMF review appears to confirm earlier anticipations that there may be a decline in Africa's economic performance this year.

An earlier analysis by the Organisation for Economic Co-operation and Development noted that prospects for a quick recovery are dismal and that other regions around the world -- including Africa -- may be negatively affected, resulting in declines in anticipated growth.

Nonetheless, despite the poor global economic performance last year, a number of African countries managed to sustain strong growth over and above the global economic crisis that began in 2007.

However, the IMF also warned that a decline in the economic performance of China could adversely impact on a number of African economies.

Increasing Chinese foreign direct investment and government funding to African countries has made it an important player in the region.

The 2012 Economic Report on Africa noted that growth in Africa last year was largely driven by commodity exports boom emanating from demand from the emerging economies such as China.

China's economic growth is, however, expected to be the lowest in more than a decade this year.

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