Real GDP growth will improve slightly in 2016, as gold production increases on the back of stronger prices. That being said, poor weather will continue to weigh on economic activity and crop production and electricity generation, keeping growth low at 1.1%.
Further progress in Zimbabwe's efforts to re-establish itself with international lenders will be largely dependent on political considerations, as the expected increase in political instability associated with President Robert Mugabe's succession will encourage populist measures. However, a slow recovery in commodity prices will offer a strong incentive for the government to rein in spending.
Inflationary pressures will return to the Zimbabwean economy before year-end 2016, on the back of an increase in the money supply as a result of the government's policy to begin printing its own version of US dollars and the reestablishment of relations with multilateral lenders. The effects will be compounded by the ongoing drought across Southern Africa, driving up food prices, but the persistence of low fuel prices will help limit the extent to which inflation returns.
Severe drought across much of Southern Africa following the onset of El Nino will ensure Zimbabwe's current account deficit remains deep despite a severe shortage of dollars in the first half of the 2016. Although commodity prices are expected to stabilise over 2016, this will be insufficient to offer any buoy to exports, which will see another year of negative growth thanks to poor production.
While Robert Mugabe will see out the rest of his life in office, the emergence of a new political party, People First (PF), will add further pressure to the issue of his succession and improve the chances of a more contested transfer of power. Fears that they will further fragment the opposition are unwarranted.
Major Forecast Changes:
We have revised our expectations for inflation on the back of a planned increase in the money supply via the printing of money and reestablishment of relations with multilateral lenders. We now expect inflation to reach 1.0% after two years of deflationary conditions.
The succession of President Robert Mugabe risks turning violent if plans are not put in place and set in motion prior to his departure, as competing vested interests struggle to fill the power vacuum left in his wake.
Premature abandonment of the foreign currency regime would likely have a negative impact on the economy.
The weather is also a major risk. The country has seen several droughts over the last two decades which have had a devastating impact on the important agricultural sector and there is always a risk of a recurrence of poor rains.
|Nominal GDP, USDbn||14.8||15.4||16.4||17.7||19.5||21.5||23.7||26.1||28.8||31.7|
|Real GDP growth, % y-o-y||1.1||1.6||3.2||5.6||6.7||5.9||5.9||5.8||5.8||5.7|
|GDP per capita, USD||957||967||1,002||1,059||1,138||1,229||1,329||1,440||1,560||1,691|
|Consumer price inflation, % y-o-y, ave||-1.4||0.4||2.0||2.0||3.0||4.0||4.0||4.0||4.0||4.0|
|Current account balance, % of GDP||-24.6||-24.3||-23.5||-22.3||-21.0||-19.6||-18.4||-17.2||-16.1||-15.1|
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