2013-12-09 11:57:19 - New Country Reports research report from Business Monitor International is now available from Fast Market Research
Although there have been some signs, since the new government was sworn in, that the authorities will moderate the nationalism that characterised the ruling party's campaign, we believe that more will need to be done in order to assuage the concerns of investors. We are therefore forecasting relatively low growth of 3.4% in 2014 and around the same level for the years thereafter.
Finance Minister Patrick Chinamasa's decision to delay delivering the budget illustrates that he is struggling to meet the Zimbabwean government's spending requirements from extremely limited fiscal resources. In order to access multilateral financing, the government will need to convince Western governments that it is committed to reform. Other financing options include tapping emerging market partners, who will look
for resources and commercial opportunities as compensation, or reintroducing a domestic currency that would almost certainly lead to high inflation and macroeconomic instability.
Full Report Details at
- www.fastmr.com/prod/751991_zimbabwe_business_forecast_report_q1_ ..
Major Forecast changes
No major forecast changes
Key risks to outlook
The political environment presents the most salient risk to our outlook for the Zimbabwean economy. If ZANU-PF moderates its nationalistic stance, our forecasts will be rendered too pessimistic. However, if the party is even more aggressive in its efforts to indigenise the economy than we currently anticipate, GDP growth could well turn negative.
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 risk of a recurrence of poor rains.
Partial Table of Contents:
Major Forecast changes
Key risks to outlook
chapter 1: political outlook
BMi political risk ratings
- Although many people we met with in Harare in September share some of our concerns about the direction of policy following President Robert Mugabe's victory at the recent election, the majority were also cautiously optimistic about Zimbabwe's economic outlook given recent developments. Many contacts expressed concerns about the health of the banking sector.
taBLe: poLitica L oVerVie W
Long- term political outlook
Key challenges For Mugabe's new term
- Zimbabwe faces an uncertain political future following the resounding victory of President Robert Mugabe and his ZANU-PF party in the 2013 general election. The main policy issues are likely to be the party's drive to indigenise the economy; questions about the independence of the judiciary and security services; and the Zimbabwean government's turbulent relationship with the West. The race to succeed the 89-year old Mugabe will also feature prominently in the years ahead.
chapter 2: economic outlook
BMi economic risk ratings
policy uncertainty to shackle economic Growth
- We retain our view that the Zimbabwean economy will grow by only 3.4% in 2014 as much-needed foreign investment will continue to be constrained by investor wariness over government policy. The risks are tilted to the upside as the economy would grow rapidly if the authorities are able to attract more investment than we currently anticipate they will. Meanwhile, any premature return to a domestic currency presents the biggest downside risk.
taBLe: econoMic actiVit Y
Balance of payments
Cars And Consumer Goods Keeping Current Account In Deficit
- Although the outlook for crucial mineral exports has improved following a change in personnel at Zimbabwe's Indigenisation Ministry, we have not changed our forecasts for the current account deficit - which we see coming in at US$3.5bn (32.6% of GDP) - as there remains little clarity on the prospects for the indigenisation of mining companies. Even if we do upgrade our export forecasts, massive demand for imported consumer goods and used vehicles will keep the account deeply in the red.
taBLe: current account
Inflation To Remain Below 4.0% In 2014
- We retain our expectation that Zimbabwean inflation will remain subdued over the course of 2014 as domestic liquidity constraints will continue to hinder demand-pull pressures, while a weak South African rand against the US dollar will limit imported inflationary pressures. The risks to this view are to the upside and stem from higher-than-expected foreign investment inflows or from an appreciation of the rand against the dollar.
taBLe: MaJor GooDs iMports in 2012
taBLe: MonetarY poLicY
Budget Delay indicative of Fiscal challenge
Full Table of Contents is available at:
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