Population 12.575 million
GDP 10.796 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
9.6 |
6.0 |
3.1 |
2.2 |
|
Inflation (yearly average) (%)
|
6.2 |
5.4 |
6.5 |
6.7 |
|
Budget balance (% GDP)*
|
-2.5 |
-3.2 |
-3.8 |
-4 |
|
Current account balance (% GDP)
|
-28.8 |
-30.7 |
-23.2 |
-27.4 |
|
Public debt (% GDP)
|
104 |
90 |
83.8 |
82 |
| (e) Estimate (f) Forecast * grants excluded |
||||
STRENGTHS
- Abundant mineral wealth (platinum, gold, diamonds, nickel)
- Agricultural wealth (maize, tobacco, cotton, wool)
- Tourism development potential
- Normalisation of relations with international community
WEAKNESSES
- Economic and financial situation damaged by long period of hyperinflation
- Precarious food and health situations: the majority of the population depends on international aid
- Under-investment in education and infrastructures, especially energy
- Prevalence of AIDS among highest in Africa and the world
Risk assessment
Weak growth vulnerable to climatic vagaries and political uncertainties
After rebounding in 2010 and 2011, in response to the end of the serious hyperinflation crisis and stabilisation of the political situation (coalition government set up in 2009), growth slowed 2012. This is explained by disappointing harvests due to poor weather conditions with drought resulting in the loss of one third of maize production. In 2013, growth is likely to suffer from a lack of private (linked to higher credit risk), public (limited by very high public debt levels and payment arrears) and foreign investment. FDIs I will be particularly depressed because of the uncertainties over the effective application of the Indigenisation and Empowerment Act supported by President Robert Mugabe but not supported by his opponent, Prime Minister Morgan Tsvangirai. The political uncertainties will be exacerbated even more by the holding of elections in 2013, on a date yet to be fixed. Exports are expected to remain steady although poorly diversified (mining and agricultural products), except for diamonds which will be hit by the restrictions imposed on their sale by some countries, like the United States.
External debt reaching a critical level
The country has a high current account deficit: exports of mining and agricultural products do not offset imports of food and services linked to the exploitation of natural resources. In 2013, the deficit is likely to widen (rising imports) and only funded to a small extent by FDIs and donations. In this context, external debt, arrears on which hit nearly 60% of GDP, is expected to climb to about 120% of GDP.
Meanwhile the banking sector is weakened by the lack of bank capitalisation and liquidity. Bank failures (like that of Royal Bank) in 2012 pushed the Central Bank to raise minimum capital requirements. In 2013, considering the political uncertainties and insufficient levels of foreign exchange reserves (less than one month’s imports) there is a high risk of a liquidity crisis.
Weakness of public accounts
The fiscal deficit worsened in 2012 due to poor tax collection (liked to very narrow tax base) and substantial expenditure. Spending is rising due to renewed recruitment of civil servants, whose salaries were increased in 2011 and who have also benefited from the renegotiation of their bonuses (early 2012). This measure, moreover, prompted the IMF to delay its proposed technical assistance, which would support the future debt restructuring necessary for improving its public finances. The situation is likely to deteriorate in 2013 due to the sharp expected rise in spending with the forthcoming elections. Revenues are expected to remain at a similar level to that of the previous year, although the Minister of Finance, Tendai Biti, has announced a slight increase in taxes on tobacco and alcohol.
Significant political risk
Tensions remain high within the government of national unity formed by President Robert Mugabe of the Zanu-PF (in power since 1980) and his main opponent and Prime Minister, Morgan Tsvangirai (of the MDC). Relations between the two parties have worsened sharply, especially over the issue of the Indigenisation Act and the contents of the new Constitution. There is still uncertainty over the enactment of the Constitution, on which the date of presidential elections depends. Nevertheless, despite this impasse, the electoral process is likely to take place during the coming year probably to coincide with the parliamentary elections in March. As during the 2008 elections, members of the Zanu-PF party could resort to violence to facilitate the President Mugabe’s re-election. Renewed deterioration of the political situation is, therefore, to be expected in 2013, and consequently the business environment and corruption are also likely to deteriorate sharply.
