Estudios Económicos
Zimbabwe

Zimbabwe

Population 15.5 million
GDP 2,122 US$
E
Country risk assessment
E
Business Climate
Change country
Compare countries
You've already selected this country.
0 country seleccionado
Clear all
Add a country
Add a country
Add a country
Add a country
Compare

Synthesis

major macro economic indicators

  2021 2022 2023 (e) 2024 (p) 2025 (p)
GDP growth (%) 8.5 6.5 5.5 2.0 4.0
Inflation (yearly average, %) 98.5 193.5 74.5 40.0 20.0
Budget balance (% GDP) -2.2 0.1 -1.5 -2.0 -2.2
Current account balance (% GDP) 1.0 1.0 0.4 0.2 1.0
Public debt (% GDP) 58.5 100.6 90.2 98.5 86.8

* Mixed inflation calculation (USD/ZiG) based on January 2020 figures from 2023 onwards

STRENGTHS

  • Abundant mineral resources (gold, nickel, lithium, platinum, diamonds, etc.)
  • Agricultural wealth (maize, tobacco, cotton)
  • Tourism development potential

WEAKNESSES

  • Economy devastated by hyperinflation
  • Cash and currency shortages exacerbated by endemic corruption and smuggling
  • External financing rendered almost inaccessible due to unsustainable debt and massive arrears to international financial institutions and bilateral creditors
  • Dependence on the prices of volatile commodities, some of which are smuggled across borders
  • Significant dollarisation of the economy (around 75% of transactions)
  • Underdeveloped infrastructure (roads, energy, water, sanitation, etc.)
  • Weak investment and productivity
  • Precarious food and health situation, dependence on humanitarian aid
  • Widespread poverty and informality, mass unemployment (21% of the population in 2023)

RISK ASSESSMENt

Growth underpinned by the mining sector

After a year of drought, floods and hyperinflation in 2022, Zimbabwe's economic growth should just about hold steady in 2023 and 2024. Activity will be underpinned by exports thanks to the high prices of gold and nickel, which together account for 47% of the country's export revenues, which in turn correspond to 25% of GDP. The exploitation of new platinum veins in the Karo mine, planned for 2024, and the construction by 2025 of a battery metal recycling facility, financed by Chinese investment to the tune of $2.8 billion, will bolster mineral exports. In addition, growth could benefit from the dynamism of lithium production, driven by foreign demand. At the end of 2022, Zimbabwe decided to control exports of this mineral in its raw form, with the aim of encouraging foreign manufacturers to invest in processing it into local concentrates. The aim is to increase mining revenues, which currently account for just over 4% of GDP. In addition, the recovery of the agricultural sector (around 9% of GDP and 62% of jobs) will contribute to growth in 2023 and 2024, following a 14% contraction in production in 2022 as a result of poor weather conditions. Nevertheless, the durably high price of fertilisers and expected climatic disorders caused by the El Niño phenomenon are likely to weigh on the yields of the country's main crops. The outlook for growth is also clouded by power cuts, which are progressing very slowly, despite the commissioning of two new 600 MW units at the Hwange thermal power station in early 2023. In addition, business forecasts are subject to changes in the inflationary situation. After a period of hyperinflation brought about by the inflationary consequences of the war in Ukraine and the accelerated depreciation of the currency, inflationary pressures are easing very gradually thanks to the tightening of monetary and fiscal policies. The issue of gold coins, coupled with the sharp rise in its key interest rate by the Central Bank of Zimbabwe, have helped reduce inflation but have not managed to containing it. The effectiveness of Zimbabwe’s monetary policy has been eroded by high dollarisation and monetisation of the public deficit, while the lack of foreign currency is contributing to currency depreciation. Inflation is therefore likely to continue to weigh on household consumption as weaker purchasing power is not being offset by wage increases.

 

Economy hit by drought and hyperinflation

Crippled by the chronic uncertainty that has hampered private consumption and investment in Zimbabwe for a number of years, economic growth will be weaker in 2024 due to agricultural production (around 10% of GDP and accounting for over 60% of jobs) being hampered by the dramatic consequences of the El Niño weather phenomenon. However, bigger harvests, a buoyant mining sector (albeit at a modest level) and an increase in tourism should contribute to a rebound in growth in 2025. Although the fall in nickel prices (32.3% of exports in 2022) will reduce export revenues from mining products – the main source of foreign currency – the sustained high prices of gold (30.3%) will offset the losses, while there are numerous projects to exploit lithium, of which the country has the largest reserves in Africa. In December 2022, Zimbabwe suspended exports of the ore in its raw form, aiming to encourage the development of a local processing industry and attract foreign investors, almost exclusively Chinese. This decision led to the signing of a USD 310 million agreement in June 2024 for the construction of a lithium concentrator (under a Sino-British consortium), which is expected to be operational in early 2026. However, the country's strategy is hampered by a deteriorating business environment and, more importantly, recurrent power cuts which are estimated to cost up to 6% of GDP every year despite the extension of the capacity of the Hwange thermal power station in 2023 to compensate for the drop in hydroelectric production caused by the drought. Public spending on modernising infrastructure, particularly the road network, will also help to support the expansion of the construction sector, even if the profound lack of interest shown by external creditors, put off by unsustainable debt, severely limits the prospects for long-term growth to below the target of 5% per year.

 

In recent years, the country's economy has suffered several bouts of hyperinflation triggered by a sharp depreciation in its currency (the official rate). The latest depreciation of around 70% over the first three months of 2024 forced the Reserve Bank of Zimbabwe (RBZ) on 5 April 2024 to replace the old Zimbabwean dollar with a new currency, the Zimbabwe Gold (ZiG), which is backed by the US dollar and backed by the country's mineral reserves, less than five years after its creation. While the exchange rate of the ZiG has remained more or less stable since its introduction and price rises appear to be moderating, inflationary pressures still remain, including drought, which has led to a serious shortage of foodstuffs and increases in domestic taxes, all of which will continue to weigh on household consumption as shrinking purchasing power is only very partially being offset by pay rises.

 

Severely restricted access to external financing

The budget situation is set to deteriorate further in 2025 as it has already in 2024. This is due to additional emergency spending in response to the agricultural crisis (mainly on food imports), high levels of investment in modernising the country's infrastructure and the increase in civil servants' salaries (almost 45% of government spending in 2024) in an attempt to tackle hyperinflation. At the same time, recent tax measures (higher taxes on companies and on lithium exports, the introduction of taxes on mining capital gains and on sugar, etc.), some of which have not in fact been applied (thus discrediting the budget) will not fully offset the rise in spending. The imbalance will nevertheless remain limited due to the difficulty of financing it other than by borrowing from local banks and a few rare foreign partners (bilateral or commercial banks), the majority of which are Chinese, since the state has undertaken to stop monetising the public deficit.

 

After two decades of suspended debt servicing, Zimbabwe resumed (symbolic) repayments to its external creditors in 2021. However, negotiations to clear its arrears and restructure its debt are progressing slowly, which is restricting any significant international financial support. As a result, public debt – around 70% of which is held by foreign partners – will continue to weigh on GDP in 2024 before easing in 2025 thanks to the rebound in growth. As a gesture of good faith, Zimbabwe plans to adopt an IMF benchmark programme in the second half of 2024, which will informally monitor its economic programme.

 

After two decades of suspended debt servicing, Zimbabwe resumed (symbolic) repayments to its external creditors in 2021. However, negotiations to clear its arrears and restructure its debt are progressing slowly, which is restricting any significant international financial support. As a result, public debt – around 70% of which is held by foreign partners – will continue to weigh on GDP in 2024 before easing in 2025 thanks to the rebound in growth. As a gesture of good faith, Zimbabwe plans to adopt an IMF benchmark programme in the second half of 2024, which will informally monitor its economic programme.

 

Controversial elections against a backdrop of international isolation

President Emmerson Mnangagwa, who rose to power in November 2017 after a period of “military-assisted transition” that forced Robert Mugabe to resign after more than 30 years at the head of the country, was re-elected for a second term in 2023. At the same time, the presidential party (ZANU-PF), which has ruled the country since its independence in 1980, won the legislative elections and secured a majority in Parliament. The elections were nonetheless marred by numerous irregularities that were denounced by the opposition, while international observers pointed to their lack of transparency. The population's discontent, exacerbated by hyperinflation, food insecurity, harsher living conditions, rising poverty – the poverty rate rose from 21.6% in 2011 to 39.8% in 2019 – and the erosion of civil liberties, remains contained by the security forces, which are backed by the government and its iron fist.

 

After a period disrupted by post-election unrest, the country's strategy of international re-engagement and negotiations to restructure its debt are tentatively resuming. Relations with the West remain tense, and Europe and the US have applied economic sanctions against several of Zimbabwe's top leaders, including President Mnangagwa himself, who has been accused of corruption and human rights violations. Against this backdrop, China remains a major economic ally, providing almost all foreign investment, particularly in the mining sector, while South Africa is the country's main trading partner, given that Zimbabwe has no access to the sea. At regional level, the regime's poor reputation did not prevent Zimbabwe from taking over the rotating presidency of the Southern African Development Community (SADC) in August 2024 for a period of one year.

 

 

Last updated: August 2024

Parte superior