Zimbabwe will record positive, albeit very mild, economic growth over the next two years as an ongoing dollar shortage compounds the impact of adverse weather conditions. The uncertainty surrounding the possibility of regime change will mean prospects for a strong recovery remain slim before President Mugabe's succession.
An ongoing currency shortage and slow economic growth will continue to weigh on public finances over the next two years. Some relief will come from the government's efforts to re-establish relations with the IMF, allowing access to much-needed credit from international lenders, but this will nonetheless lead to some widening of the budget deficit.
In the event of de-dollarisation in Zimbabwe, high levels of inflation would make a return to the economy, as weak balance of payments dynamics would see the new currency sell off at a rapid rate. This Reserve Bank of Zimbabwe would accompany the process with a series of interest rate hikes in a bid to temper price growth, but with little effect.
While Zimbabwe's current account deficit will narrow significantly in 2016, this is a result of the country's chronic shortage of foreign currency and lack of inward investment, rather than any improvement in exports. Dynamics will improve slightly in 2017 as the economy sees some recovery, but the external position will remain vulnerable to volatility in investor sentiment.
Increasingly vocal opposition to President Robert Mugabe will add to pre-existing pressures surrounding the prospect of political succession in Zimbabwe. The likelihood of a chaotic transition of power will increase the risk of derailing the country's fragile economic recovery.
Major Forecast Changes:
We have revised our expectations for the current account deficit over 2016, as weak demand and the ongoing shortage of US dollars in the economy will limit imports.
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||15.6||16.5||17.9||19.7||21.7||23.9||26.3||29.0||32.0|
|Real GDP growth, % y-o-y||0.7||1.6||3.2||5.6||6.7||6.0||5.9||5.9||5.8||5.8|
|GDP per capita, USD||958||977||1,012||1,068||1,148||1,239||1,340||1,451||1,572||1,704|
|Consumer price inflation, % y-o-y, ave||-1.4||1.5||2.0||2.0||3.0||4.0||4.0||4.0||4.0||4.0|
|Current account balance, % of GDP||-17.4||-16.9||-16.6||-16.4||-16.2||-16.1||-16.0||-15.9||-15.8||-15.6|
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