Finance minister Mthuli Ncube says the country will not achieve GDP growth as he had projected when he presented his inaugural 2019 budget in November last year due to the deepening economic crisis.
Presenting the Mid-Term Budget Review in Harare yesterday, Ncube painted a grim picture of the prevailing economic situation and future prospects.
"Owing to negative natural conditions, which badly affected a number of sectors particularly agriculture and power generation, coupled with inflationary pressures, foreign currency shortages and limited external financial support, the economy has faced major drawbacks to growth stimulation in the first half of 2019," Ncube said.
"In view of the headwinds, the revised 2019 GDP growth is expected to be negative and even below the -2% projected under the SMP (Staff-Monitored Programme).
"Treasury will, therefore, keep tracking key developments in the economy with a view of making appropriate adjustments to sectoral growth profiles."
Government had projected 3,1% growth for 2019.
Agriculture is expected to contract by 10,1% from an initial growth projection of 3% with the mining growth rate revised downwards from a projected 7,5% to just 1,1%. The manufacturing sector is expected to register 0% growth against the initial projected 2,5% with electricity and water projected to have a negative growth rate of 2,3% compared to an initial projection of 2,6% growth.
Falling aggregate demand, plunging production, diminishing purchasing power, eroding incomes and rising inflation are buffeting the economy which the International Monetary Fund (IMF) says will contract by 5,2%. This comes as runaway inflation is wreaking havoc in the economy with annual inflation reaching 175,66%. Some analysts had projected that inflation will reach between 250% and 500% by year-end as the recession continues to bite.
Ncube has, however, announced that the publishing of year-on-year inflation figures will be deferred until after February 2020 as part of measures of inflation rebasing.
A recession refers to a significant decline in general economic activity that goes on for months. It is visible in industrial production, employment, real income and wholesale-retail trade.
The decision to separate foreign currency accounts from Real-Time Gross Settlement accounts and the floatation of Zimbabwe's new currency has come back to haunt the troubled country's economy.
Workers' earnings, pensions and savings are losing value fast in the face of rising inflation and the weakening local currency.
This has had the effect of lowering disposable incomes and aggregate demand, hence production.
Of all the problems, power outages have inflicted the most damage on the economy and its growth prospects.
Ncube also admitted as much yesterday, saying electricity shortages were reversing the gains of his economic austerity measures.
"Drought has reduced hydro-electric generation at Kariba Dam, reducing power supply to unsustainable levels as reflected through severe load-shedding," he said. "The current electricity supply situation retards all our stabilisation gains and require urgent interventions to improve power supply to our productive sectors."