Business Reporter
BUSINESS Monitor International (BMI), a global economic think tank, has projected Zimbabwe's economy to double by 2016, driven by buoyant commodity prices and a stable government.
BMI sees the country's nominal Gross Domestic Product (GDP) leaping to US$13,6 billion in four years, despite warning that uncertainty over the next general elections could slow down growth. Zimbabwe's economy is expected to grow to US$6,9 billion this year, buoyed by a strong performance in mining and recovery of tobacco output. BMI said Zimbabwe's projected 15,8 million population is expected to experience a US$26,8 billion economy in 2021.
"Although we forecast that the Zimbabwean economy will grow at robust rates of more than seven percent over the coming years, we note that domestically focused industries are facing serious challenges that will lead them to underperform sectors that are more export-orientated. We expect inflation to head higher over the course of 2012, driven predominantly by a 30 percent increase in electricity tariffs. That said, we believe that price growth will average a very manageable 5,1 percent over the course of the year," reads BMI's 10-year forecast on Zimbabwe.
"The key risk to Zimbabwe's economy emanates from politics. Although the exact timing remains uncertain, there will be an election held in the next 18 months, the lead-up to which is likely to cause a rise in the risk of political instability, potentially harming economic activity. Conversely, a faster than expected resolution to Zimbabwe's ongoing political issues could see foreign investment flow into the country, rendering our economic forecasts too low."
Once stabilised, the country has significant potential in agriculture, mining and industry, BMI said, adding that there is likely to be a concerted and well funded donor effort towards reconstruction.
BMI however, warned that Zimbabwe's food related inflation was likely going to contribute an upward trend to annual inflation. The researchers see consumer prices averaging seven percent from 2012 up to 2021.
"Although the agriculture industry is making a comeback, Zimbabwe is still a net food importer. With food making up over 30 percent of the consumer price basket, a disruption to regional food supplies would see headline inflation head sharply higher," read the report.
"After more than a decade of economic contraction, Zimbabwe is forecast to register rapid growth, barring a collapse in the unity government. Yet, given the large dependence on foreign funding, the economy will remain extremely vulnerable. Aside from the necessity to finance the gaping current account and fiscal deficits, financial stability will be highly contingent on domestic political will to foster confidence in the country's banking system and currency regime."
Despite this bullish outlook, some critics both locally and internationally contend that Zimbabwe's economic growth could have reached optimal levels due to political and economic policy uncertainty despite experiencing a 10-year contraction that truncated the GDP by unprecedented levels.
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