Zimbabwe Overview #FredmacInvestments_a_reliablePartnerinZimbabwe #investinZim Zimbabwe held harmonized elections on July 31, 2013, in which nearly 3.5 million voters took part. President Robert Mugabe won the election with 61.09% of the total votes cast, and his party Zanu PF won two thirds majority, with 160 seats in the House of Assembly out of 210 seats. Former Prime Minister, Morgan Tsvangirai polled 33.94% of the total votes cast or 1,172,349 votes, while his party, MDC-T won 49 seats in the House of Assembly. There was one Independent candidate who won a seat. President Mugabe took his oath of office on August 22, 2013. In his inauguration speech, he paid tribute to his Global Political Agreement (GPA) partners – former Prime Minister, Morgan Tsvangirai and Professor Welshman Ncube for their role in crafting a new Constitution for Zimbabwe. Newly elected Parliamentarians were sworn in on September 3, 2013 while the first session of the Eighth Parliament of Zimbabwe opened on September 10, 2013. On the same day, President Mugabe announced a 27- member Cabinet that includes three female Cabinet Ministers and Deputy Ministers as well as 10 provincial Ministers. Economic Overview Since 2009, Zimbabwe’s economy has started to recover from the 1999-2008 crises that saw economic output cumulatively declining by more than 45%. Supported by a strong recovery of domestic demand and government consumption, real gross domestic product (GDP) grew by 20.1% in 2009-2011. GDP growth was led by strong growth in mining (107%), agriculture (35%) and services (51%) while recovery in manufacturing sector (22%) has been less vigorous. Despite the strong 2009-2011 economic rebound, GDP growth has moderated to 4.4% in 2012 and slowed to an estimated 1.8% in 2013, dampened by the sluggish performance of the key sectors of the economy. The agricultural sector contracted by 1.3% in 2013 as the production of maize and cotton declined due to adverse weather conditions, lower hectarage and subdued yields. Uncertainty about the implementation of the indigenization program and declining commodity prices negatively affected overall growth in the mining sector. Growth in manufacturing (1.5%) remained low in 2013, stunted by tightening credit conditions, subdued investment and declining competitiveness. The services sector remains the biggest contributor to GDP, at 56%, but growth remain depressed at 2.8 percent in 2013. Annual inflation remained low, closing 2013 at 0.3 %, raising the spectre of deflation. The external position remains under pressure as merchandise exports slumped by 2.8% to reach $3.5 billion in 2013, while imports reached $7.7 billion, driven by fuel, food, and machinery and manufactured goods . The current account deficit remained elevated at 22% of GDP in 2013, largely financed by short-term capital inflows. Foreign exchange reserves remain low at 0.2 months of import cover in 2013, while errors and omissions remain high at $700 million, reflecting persistent unregistered remittances, unreported exports and unidentified financing. The strong fiscal recovery which characterized the 2009-2011 period has moderated in 2012 and 2013. Government Revenues reached $3.7 billion (29% of GDP), while expenditure totaled $4 billion in 2013. Expenditure remains heavily skewed towards employment costs, which absorbed $2.3 billion (68% of current expenditure), crowding out critical social and capital expenditures. The government ran a primary deficit estimated at 1.9% of GDP in 2013, largely financed by the issuance of Treasury Bills. Zimbabwe is in debt distress as total external debt at the end of 2012 remains high at 70% of GDP. Most of the overdue obligations are owed to the World Bank ($1.02 billion), African Development Bank ($589.6 million), European Investment Bank ($126.1 million) and International Monetary Fund ($138 million). The recent poverty report on the 2011-2012 Poverty, Income Consumption and Expenditure Surveys (PICES) (ZimStat 2013) reveals that 72.3% of Zimbabweans are poor, with poverty being most prevalent in rural areas, where 84.3% of people are deemed poor. 62.6% of households are deemed poor, whilst 16.2% of them are in extreme poverty. Growth in total credit to the private sector is leveling off as it reached $3.9 billion in December 2013. Average loan to deposit ratio for banks which steadily increased since 2009 remains elevated at 94% in 2013.Vulnurabilities in the banking sector are rising amidst rising levels of non-performing loans (15.9% by December 2013), low liquidity levels (27.8% by December 2013) and rising credit risks especially in smaller banks. As solvency concerns increase in the banking sector, the RBZ has intensified the monitoring of troubled banks. The recovery of the economy remains fragile as a number of issues continue to hold back prospects for sustainable economic growth. These relate to: easing international prices of minerals unbalanced external position liquidity challenges and very high real interest rates on short-term credit ballooning wage bill in the public sector and the possible fiscal slippage ailing and deficient infrastructure (lack of resources to rehabilitate infrastructure) and unreliable power supply possible compression of exports on the back of the still fragile global economy potential destabilizing effects of the indigenization program on the economy, and disorderly unwinding of vulnerabilities in the banking sector Last updated June 2014
Posted on: Thu, 14 Aug 2014 08:19:52 +0000
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