Zimbabwe: Economic Outlook for 2014 Remains Gloomy

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While in his budget statement Chinamasa addressed issues such as the recapitalisation of the RBZ, restoring the RBZ's lender of last resort function, repayment of corporate FCAs, developing money and capital markets and the retention of the multicurrency regime, the strengthening of RBZ supervision and oversight function, he backed the controversial indigenisation policy in its current form, a comment that sapped the little confidence investors had left in the economy and Zanu PF government.

Against such a background, analysts say there is need to restore confidence in the economy in the wake of Zanu PF's controversial triumph in the July 31 general elections.

Economist John Robertson said 2014 is likely to be worse than 2013 unless government makes major changes in respect of legislation such as the Indigenisation Act.

"Currently, investors are making deliberate decisions not to come to Zimbabwe because indigenisation demands too much," he said.

With policies that do not attract investment still in place, economic growth is likely to be minor and less than the projected 6,1%, Robertson said.

"In fact, there could be shrinkage and prospects of paying civil servants will be gloomy," he said.

Robertson would not be drawn to give his own growth projections.

In a bullish scenario the Zimbabwean economy will grow by 2,9% in 2014, and 1,3% in a bearish one, Econometre Global Capital researcher Takunda Mugaga said.

Mugaga said a US$4,1 billion budget does not have the capacity to drive a 6,1 % economic growth given the current state of the country's capital account and a balance of payment that is further deteriorating.

"No substantive approach will be in place for tackling the country's US$7 billion external debt," Mugaga said.

He said prospects of automating the Zimbabwe Stock Exchange (ZSE) by end of 2014 are very remote given the challenges that have delayed the process over the years. No new listing is expected on the local bourse.

The Econometre researcher said two or three indigenisation deals might accrue due to certainty from the last budget in forging ahead with the exercise, but politicians may highjack the process and destroy possible benefits.

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