Boston, MA -- (ReleaseWire) -- 04/10/2014 -- A spate of revelations about corruption and mismanagement at Zimbabwean state-owned enterprises by state media has been applauded, but has also raised the ire of the general public, given the magnitude of some of the figures involved. Questions have been raised about why this problem, which has more or less been public knowledge for some time, is being publicly aired now. While an attempt to free up fiscal resources is probably a factor, it also appears that a battle to succeed ageing President Robert Mugabe at the helm of the ZANU-PF party is playing a part.
Although we think that remittance flows are larger - and therefore that the current account deficit is smaller - than official data suggest, we nonetheless believe Zimbabwe's external accounts will remain precarious. The trade deficit will remain wide and although current transfers will go some way to offsetting this, long-term sustainability will be difficult to achieve until the authorities are able to attract foreign investment.
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We retain our view that the Zimbabwean economy will expand by 3.5% in 2014 as a liquidity crunch will weigh on investment, government spending and net exports. Although it appears that private consumption slowed in 2013, we believe that this component of GDP will accelerate in 2014. There are significant upside and downside risks to our forecasts.
Major Forecast Changes
No major forecast changes.
Key Risks To Outlook
The political environment presents the most salient risk to our outlook for the Zimbabwean economy. If ZANU-PF moderates its nationalistic stance, our forecasts will be rendered too pessimistic. However, if the party is even more aggressive in its efforts to indigenise the economy than we currently anticipate, GDP growth could well turn negative.
Premature abandonment of the foreign currency regime would likely have a negative impact on the economy.
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