THE World Bank is more optimistic about Zimbabwe’s economic growth prospects with the institution forecasting a 2.8% increase in GDP from the one percent estimated for 2015. Government had projected a growth rate of 2,7 percent for the year mainly on account of mining, tourism, construction and the financial sector.
According to the World Bank Global Economic Prospects, the forecast 2,8 percent growth rate is 0,3 percentage points higher than the projections made in June last year.
However, with a drought looming this year, and the US dollar strengthening on the rand, coupled with falling commodity prices, economic growth will likely be constrained in 2016, according to analysts.
Going forward a growth rate for the country of three percent is expected for both 2016 and 2017.
Globally, the World Bank trimmed its global growth outlook, citing anemic recovery in major emerging markets, although it suggested that overall growth will improve from last year, underpinned by advanced economies.
Global economic growth is forecast to be 2,9 percent this year, instead of the 3,3 percent projected in June, the Washington-based lender said in its bi-annual report.
At an estimated 2,4 percent, global growth was weaker than expected in 2015 due to falling commodity prices, flagging trade and capital flows and episodes of financial volatility.
Firmer growth this year will depend on continued momentum in high income countries, the stabilization of commodity prices and China’s gradual transition towards a more consumption and services-based growth model, the bank noted.
Global growth is set to improve to 3,1 percent in 2017, but slightly weaker than the prior estimate of 3,2 percent.
The economic rebalancing in China is continuing and accompanied by slowing expansion. China’s growth is forecast to ease further to 6,7 percent in 2016 from 6,9 percent in 2015. It will moderate again to 6,5 percent the next year, the bank said.
The outlook for 2016 was lowered from seven percent and that for 2017 estimate from 6,9 percent.
Sub-Saharan Africa growth slowed to an estimated 3.4 % in 2015, the lowest rate since 2009, due to low commodity prices and infrastructure constraints. A rebound is expected in 2016-18, as these headwinds wane, providing some support for government spending and private investment.
The report notes that Sub-Saharan Africa faces a challenging near-term outlook. Commodity prices are expected to stabilize but remain low through 2017. “The normalization of U.S. monetary policy is expected to tighten global financial conditions,” says World Bank.
Although governments are taking steps to resolve power issues, electricity supply bottlenecks are expected to persist, the World Bank says these factors point to a somewhat weaker recovery in 2016 than previously anticipated. After slowing to 3.4 % in 2015, activity is expected to pick up to 4.2 % in 2016 and to 4.7 % in 2017-18.
“This projection assumes that commodity prices stabilize and electricity constraints ease. There are, however, considerable variations within the region. Consumption dynamics will continue to differ for oil exporters and importers. Private consumption growth is expected to remain weak in oil exporters as the removal of subsidies to alleviate pressure on budgets results in higher fuel costs, and as currency depreciation weigh on consumers’ purchasing power. By contrast, lower inflation in oil importers, owing in part to lower fuel prices, should help boost consumer spending. The price level impact of currency depreciation combined with interest rate increases could, however, moderate these effects that these effects could be sizeable and have likely contributed to the ongoing slowdown in the region.
A modest recovery is projected in Nigeria and South Africa, the region’s two largest economies. For Nigeria, the forecast assumes that uncertainty around government policy is lessened; that fuel and power shortages become less severe; that fiscal consolidation tapers off; and that import costs decline.
In South Africa, labour and social tensions, high unemployment, and constraints associated with electricity supply will continue to weigh on activity. However, low-income countries may register relatively high growth, supported by large-scale infrastructure investment and resilient consumer spending.
World Bank notes that overvalued currencies and larger fiscal and current account deficits over the period 2011-14 have eroded policy buffers, thus limiting policy options should shocks arise
Monetary tightening has further weighed on growth as policy makers responded to sharp depreciations by lifting interest rates (Uganda) or drawing down reserves (Burundi, Tanzania, Dem. Rep. of Congo, Zimbabwe and Mozambique).
Overall the report says political risks could deter domestic and foreign investment in some countries, weigh on tourism, and add to fiscal pressures. Fragmented political situations could also undermine the ability of governments to undertake and implement needed policies.-FinX
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