Zimbabwe’s exports have had grown faster since the recovery from the shock caused by the COVID-19 pandemic. The country’s total merchandise exports had a faster growth since the recovery to USD 6.0 billion in 2021. Zimbabwe has a concentrated export profile and earnings from gold have continued increasing to USD 2.4 billion (approx. 40.2% of total exports) in 2021. Other top exports from Zimbabwe include tobacco and nickel. These exports contributed USD 1.7 billion (approx. 28.1% of total exports). Zimbabwe’s export earnings from tobacco have continued decreasing to USD 861.2 million in 2021; and earnings from nickel have continued increasing to USD 836.2 million in the same period. Zimbabwe’s trade deficit continued widening beyond the historical medium-term average of -USD 1.6 billion for 2018 to 2020, to -USD 2.4 billion in 2021.
Total merchandise export earnings have continued increasing which ameliorated the relieved pressure caused by net FDI inflows (foreign capital being invested domestically). Zimbabwe’s FDI inflows decreased to USD 166.0 million in 2021. Zimbabwe’s FDI stock has been seemingly unaffected by COVID-19 and continued increasing from an annual average of USD 5.7 billion for 2018 to 2020 to USD 6.1 billion in 2021. This bodes well for Zimbabwe as a country that is aiming to attract more foreign investment to develop and diversify its economy away from the reliance on gold exports. However, Zimbabwe is still a long way from being able to attract foreign investors to take advantage of the many economic opportunities in various sectors due to the persistent economic and liquidity crises constraining the country. In this context, it has mainly been the mining and agricultural sectors that have traditionally attracted foreign capital in the economy, which would signify little progress for the national economic development and diversification strategy.
Remittances receipts have grown significantly over the period. Personal remittances received have been seemingly unaffected by COVID-19 and continued increasing from an annual average of USD 1.6 billion for 2018 to 2020, to USD 2.0 billion in 2021. Personal remittance payments to foreign nationals have begun moderating since the COVID-19 pandemic from an annual average of USD 21.5 million for 2018 to 2020, but Zimbabwe did not declare any remittance payments to foreign nationals in 2021. Zimbabwe has had net remittance inflows (net remittance receipts from the diaspora) which increased to approximately USD 1.9 billion in 2021. This has affected the current account balance and strength of the ZWL over the period.
The ZWL has begun depreciating persistently and failed to reestablish a credible currency in Zimbabwe despite the period attempts by the Reserve Bank of Zimbabwe. Although the ZWL was established at par to the USD, the currency has exchanged a vastly depreciated rates on the black market due to the ongoing liquidity crisis in Zimbabwe. Zimbabwe’s current account surplus narrowed despite being above the historical medium-term average. In 2022, Zimbabwe’s current account surplus narrowed from the historical medium-term average. In particular, Zimbabwe has benefited from the higher commodity prices which continued appreciating due to lower global supply following the sanctions against Russian exports after its military exercises in Ukraine. The global price of gold appreciated by 1.4% to USD 1,825.2 per oz in 2022 (2021: 1.7%; USD 1,799.8 per oz). However, this has been offset by continued higher fuel and food import prices. This is also reflected in the projections for Zimbabwe’s current account balance.
In 2023, Zimbabwe’s current account surplus is projects to narrow from the historical medium-term average to USD 96.0 million (approx. 0.3% of GDP). In the medium-term from 2024 to 2026, Zimbabwe’s current account surplus is projected to recover slightly, to an annual average of USD 197.3 million (approx. 0.5% of GDP). This illustrates a persistent deterioration in the current account balance due to the currently high fuel and food prices which is primarily driven by the impact of sanctions against Russia and the conflict with Ukraine. However, this could change in the medium-term due to the expected easing of geopolitical tensions. Therefore, Zimbabwean authorities are still faced with difficulties ahead unless they can take advantage of opportunities in nickel to offset the cost of high fuel and food imports. The global price of nickel appreciated by 40.7% to USD 25,980.6 per MT in 2022 (2021: +33.9%; USD 18467.1 per MT).
The issue of developing and diversifying the Zimbabwean economy remains an elusive obstacle for the country. Zimbabwe still has a significant potential to grow its exports from tobacco and nickel. These represent the highest growth potential towards diversifying the Zimbabwe’s economy and export earnings. Apart from this, Zimbabwe should also deepen its integration in the SADC region and increase its intra-regional trade. This will provide an opportunity for Zimbabwe’s exports to compete against goods and services of comparable quality from the SADC region. Moreover, Zimbabwe can offset the risks with its traditional export markets by increasing its dependence on the SADC region for its exports.