‘Zimbabwe’s 2019 growth projections unrealistic’

ZIMBABWE’S nine percent growth projection for next year is “unrealistic” due to government’s excess expenditure and money creation, economic analysts have said.
Finance minister Mthuli Ncube made the projection in his 2019 pre-budget strategy paper, in which he also said the economy is expected to surpass the initial budget growth projection of 4,5 percent to reach 6,3 percent in 2018, after recording a growth of 4,8 percent in 2017.
“Nine percent is a very ambitious projection. The Transitional Stabilisation Programme (TSP), the Monetary Policy and the pre-budget paper all say there is need to right size the government. This means dealing with excessive spending and money creation.
“This is not palatable with a growth of nine percent in 2019. We cannot right size the government and grow the economy at such a fast pace at the same time,” Persistence Gwanyanya, an economist, told The Financial Gazette this week.
“If we achieve a six percent growth in 2018, it will be unsustainable growth because it will have been driven by undue government expenditure, which we all agree should be curbed.
“This situation fosters growth which is beyond the productive capacity of the economy. Premised on what has been happening, the next logical thing is to curb money supply growth so any growth attached to that is not sustainable,” he added.
Ncube said the 6,3 percent growth in 2018 has been driven, on the demand side, by government spending, “largely in the form of grain and inputs procurement, extension of loans to parastatals, and to some extent, hard infrastructure projects such as dam construction and roads rehabilitation”.
The cumulative national budget deficit for the first half of 2018 stood at $1,21 billion, after government collected $2,51 billion in revenue against expenditures of $3,72 billion.
Chris Mugaga, another economist, concurred, saying an inflation adjustment on the growth figures would give a more realistic picture.
“The problem with the growth figures in the pre-budget paper is overreliance on nominal GDP growth. It is not realistic, when you have growth being driven by government expenditure, then that growth is unsustainable and inflationary. If we adjust 2018 growth for inflation it will be way less than what has been published, it will probably be less than 2,5 percent,” said Mugaga, who is also the Zimbabwe National Chamber of Commerce chief executive said.
Meanwhile, Fitch think tank, BMI, which projects a 1,9 percent growth for 2018 and 2,3 percent for 2019, sees subdued growth in the near future on account of the country’s monetary system.
“In the coming year, Zimbabwe’s cumbersome and inefficient monetary system will remain in place, constraining economic growth through higher-than-reported levels of price growth and through businesses’ difficulties in accessing imported goods and services,” the research firm said in its Africa Monitsor report for November 2018.
The World Bank and the International Monetary Fund also see subdued growth for the country in the near future with the former projecting 4,2 percent for 2019 while the later projects a growth of 3,7 percent.
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