The modest reduction in Zimbabwe’s gross domestic product this year of minus 4,5 percent due to Covid-19, will be counterbalanced by growth of 7,5 percent next year as the Zimbabwean and global economies cope with the pandemic, the Treasury has predicted.
“In 2021, the economy is predicted to recover from a
projected contraction of -4,5 percent in 2020 to a growth of 7,4 percent,
driven by consumption (2,6 percent) and investment (5,8 percent) improvements,”
said Finance and Economic Development Minister Professor Mthuli Ncube
yesterday.
Launching the 2021 Budget Strategy Paper in Harare, a
document expected to guide wider consultations on the upcoming 2021 National
Budget, the Minister said: “The recovery in consumption is mainly anchored on
expected stabilisation of inflation through ongoing policy interventions which
should aid restoration of purchasing power of consumers.
“Employers including Government will continue to review
wages and salaries in line with inflation developments and budget capacity to
restore eroded incomes as the economy recovers.”
The 2021 Budget Strategy Paper marks the transition from
the Transitional Stabilisation Programme, which is coming to an end this
December, paving way for the longer term National Development Strategy from
2021-2025.
The stabilisation programme was designed to sort out the
major structural fiscal and monetary problems inherited by the Second Republic,
with success now seen in stable market-driven exchange rates and resulting low
monthly inflation.
With the fundamentals fixed and distortions removed, the
Government can now switch to rapid economic growth based on real increases in
production.
The 2021 Budget Strategy Paper is themed “Building
Resilience and Economic Recovery Post Covid-19”.
“Government is launching the 2021 Budget Strategy Paper
(BSP) in line with the New Dispensation’s commitment of ensuring broader stakeholder
involvement in policy formulation processes, that way generating effective
public participation in policy and programmes implementation,” said the
Minister.
“Accordingly, the 2021 Budget Strategy Paper (BSP)
constitutes a valuable tool, meant to guide consultative discussions and
sharing of ideas on national priority policies, programmes and projects for the
forthcoming 2021 National Budget,” reads part of the document.
“Under the theme “Building Resilience and Economic Recovery
Post-Covid-19”, the Budget Strategy Paper focusses on strengthening the economy
to withstand any potential climatic (drought, cyclones, floods, pests) and
macro-economic shocks, as we focus on attaining inclusive and sustainable
growth towards Vision 2030.”
Monthly inflation is now falling to almost trivial levels
and this will be seen in revised annual inflation predictions with the 12-month
rate by year-end now expected to be 134 percent, down from the initial
prediction of 300 percent.
This is a result of the high monthly inflation recorded in
the last five months of last year fall out of the calculation to be replaced by
trivial monthly rates already seen and predicted for the rest of this year.
Annual inflation measures the rise in the cost of living
over the previous 12 months. With monthly inflation rising steadily from
February last year until July this year, when it peaked at 35 percent, the
running 12-month figure also rose in line with the monthly rates to a peak of
around 837 percent.
But since the introduction of the foreign currency auction
system, which has brought about macro-economic stability, high monthly figures
from August and September last year have already been replaced by very low
figures from the same two months this year, which in turn has seen the
resulting annual inflation figures falling to almost 660 percent.
Even the 134 percent now predicted by year-end will be
largely due to the rising monthly figures between February and July this year,
after an anomalous very low January figure.
“The slowdown in inflation will be attributed to deepening
of the foreign currency auction market which is expected to sustain exchange
rate stability,” said the Minister.
“Reserve Bank of Zimbabwe is also expected to continue to
curtail growth in money supply, which is one of the major drivers of
inflation.”
Prof Ncube said economic prospects for the coming year will
be underpinned by “macro stability characterised by currency stability,
declining annual inflation averaging 134 percent, and fiscal stability.”
The foreign currency auction system has brought about price
stability as a good number of retailers and service providers are now utilising
market-based pricing, and this is being reflected in recent inflation trends.
The stability has been predicated on the fiscal discipline
of the Second Republic with Government living within its means, that is what it
collects in taxes, instead of wild borrowing and then printing, in later years
printing digitally, extra money and thus driving up money supply without
corresponding increases in production.
The month-on-month inflation rate in September 2020 was
3,83 percent, reinforcing the dramatic fall seen in August, when it had fallen
to 8,44 percent. Herald
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