The World Bank is forecasting a 2.8 percent increase in Zimbabwe’s gross domestic product from the 1 percent estimated for 2015. The government had projected a growth rate of 2.7percent 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.
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. However, there are high expectations that the economy will move in a positive direction as the government continues with efforts to attract investments.
The government recently unveiled flexible indigenisation frameworks and is currently working on improving the doing business environment and its debt clearance strategy. The moves are expected to unlock additional funding for economic activities by the half year. Going forward a growth rate for the country of 3 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 3.3percent 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 stabilisation 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 3.1percent in 2017, but slightly weaker than the prior estimate of 3.2percent.
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 7 percent and that for 2017 estimate from 6.9 percent.
Sub-Saharan Africa growth slowed to an estimated 3.4 percent 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 stabilise but remain low through 2017. “The normalisation of US 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 percent in 2015, activity is expected to pick up to 4.2 percent in 2016 and to 4.7 percent in 2017-18.
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, Democratic Republic 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. — Wires