Zimbabwe’s economy has had a slow recovery from the shock caused by the COVID-19 pandemic. Real GDP growth is projected to improve from an annual average of -1.7% for 2019 to 2021, to 3.5% in 2022. Inflation is projected to decrease from an annual average of 303.7% for 2019 to 2021, to 86.7% in 2022. The elevated inflation is caused by the continued economic crisis, severe liquidity and energy constraints, and the recent sanctions against Russia which have increased the price of crucial imports. In the medium-term period from 2023 to 2025, real GDP growth is projected to decrease to an annual average of 3.1%. Meanwhile, inflation is projected to decrease to an average of 35.1% over the medium-term from 2023 to 2025.
The Government of Zimbabwe’s debt has begun moderating after increasing in 2020. Zimbabwe’s gross public debt is projected to decrease from an annual average of 87.8% of GDP for 2019 to 2021, to 67.2% of GDP in 2022. The decrease in public debt is largely due to the economic recovery and the Government of Zimbabwe attempts to reduce arrears in order to reengage with international creditors. The fiscal deficit is projected to widen from an annual average of -0.8% of GDP for 2019 to 2021, to -2.6% in 2022. This shows the procyclical fiscal stance taken by the government as spending and further borrowing outpace revenue growth. In the medium-term period from 2023 to 2025, the fiscal deficit is projected to widen to an annual average of -2.7% of GDP. However, public debt is projected to decrease to an average of 60.1% of GDP over the medium-term from 2023 to 2025.
Zimbabwe’s external sector was not negatively affected by the COVID-19 pandemic in 2020 but the sector has begun deteriorating due to the rebound in commodity prices, which have eased the foreign exchange liquidity constraints and raised demand for imports. Zimbabwe’s current account surplus is projected to narrow from an annual average of USD 1.1 billion (approx. 4.1% of GDP) for 2019 to 2021, to USD 901.0 million (approx. 2.5% of GDP) in 2022. In the medium-term period from 2023 to 2025, the current account surplus is projected to narrow to an annual average of USD 222.0 million (approx. 0.6% of GDP). This illustrates a continued deterioration in the current account balance due to the current rebound in commodity prices which is primarily driven by the impact of sanctions against Russia. Therefore, Zimbabwean authorities will have to take advantage of the current reprieve and invest in reduce the external arrears in order to resume engagements with international creditors and international financing institutions for debt relief.
Zimbabwe is scheduled to hold its national elections in 2023 and the election campaigning cycle is currently underway. Incumbent President H.E. Emmerson Mnangagwa will most likely be vying for a second term in order to rescue a legacy marred by failed economic recovery, worsening poverty and persisting political repression. The current political climate remains tense due to worsening pressures caused by the persisting economic crisis that has destroyed the livelihoods of most Zimbabwean citizens. President H.E. Emmerson Mnangagwa will seek to play a more meaningful role in resolving the insurgence in neighbouring Mozambique. This remains the central aim in Zimbabwe’s regional priorities as a member of SADC and COMESA.