Preliminary impact of Covid-19 in Zim

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Across the globe, governments have responded to the crisis in different ways. BY UNDP Zimbabwe The most common response measures, however, have been the implementation of fiscal stimulus packages, complete or partial lockdowns and movement restrictions, and the enforcement of basic hygiene practices such as regular hand washing and social distancing. Since the onset of […]

Across the globe, governments have responded to the crisis in different ways.

BY UNDP Zimbabwe

The most common response measures, however, have been the implementation of fiscal stimulus packages, complete or partial lockdowns and movement restrictions, and the enforcement of basic hygiene practices such as regular hand washing and social distancing.

Since the onset of the pandemic, the government of Zimbabwe has instituted a number of policy, institutional and operational measures to combat and contain the pandemic and reduce its negative impact, especially on the poor and vulnerable members of society.

Zimbabwe has a projected population of 16,2 million, 52% of whom are female and 67% live in rural areas.

Nine percent of the population has a disability while life expectancy was estimated at 60 years in 20173.

The population is young with about 67% below the age of 35, with the 15-24 age group accounting for approximately 36% of the population, and the under 15 year olds accounting for 77% of the population.

This raises concern on the impact of the pandemic on youth employment and access to services.

As per the Zimbabwe demographic profile, sex and age disaggregated data would be required to identify the most vulnerable groups.

On March 21, 2020 Zimbabwe began a 21-day national lockdown in a bid to combat the spread of the coronavirus.

This resulted in the shutting down of all activities and services except those that were defined as essential such as health care and law enforcement.

This initial lockdown was subsequently extended by an additional two weeks.

Subsequent to that, on May 3, 2020, the lockdown was further extended by another two weeks, but with more relaxed provisions.

This allowed people to ease back into business while maintaining the recommended safety guidelines including mandatory wearing of face masks and maintaining social distancing.

The informal sector, however, where a large proportion of women operate was and is still not open.

On May 16, 2020, this status of affairs, that is relaxation of lockdown measures, was extended indefinitely with a proviso for government review every fortnight.

On May 4, 2020, the government announced an ambitious $18 billion (approximately US$720 million or nine per cent of Gross Domestic Product) economic stimulus package aimed at providing liquidity support to the productive sectors of manufacturing, agriculture, mining and tourism, while also targeting employment protection; recovery of micro, small and medium enterprises (MSMEs); strengthening and expansion of existing social safety nets, including direct income support for vulnerable groups and individuals; improvement of financial inclusion through banks and micro-finance institutions; and upscaling investments in economic and social infrastructure, while building the resilience of affected communities.

This ambitious package represented an improvement from an earlier package unveiled in April 2020 of $500 million (approximately US$20 000 000) to help fight the pandemic and ZWL$50 million (US$2 000 000) for medical aid, mostly for civil servants on the frontline of the response.

The earlier measures also included expenditure restructuring away from capital projects to health-related expenditures; ring-fencing of the 2% money transfer tax for social protection and other pandemic related expenditures; $50 million (US$2 million) for urgent and immediate importation of health-related supplies; immediate hiring of over 4 000 health personnel; $200 million (US$8 million) per month for a period of three months as cash transfers to an estimated one million vulnerable households; expeditious processing of value added and corporate tax refunds; suspension of customs duty chargeable on Covid-19 medical supplies; review of procurement rules to expedite purchase of Covid-19 supplies; and support for local industries with capacity to produce basic food stuffs and pharmaceuticals.

Zimbabwe aspires to become a prosperous and empowered upper middle-income country (Upper MIC) by 2030.

The vision is to be realised through the implementation of three successive Strategic Programmes: a Transitional Stabilisation Programme (TSP) covering the period October 2018 to December 2020; and two successive Five-Year Development Strategies (NDSs) covering the periods 2021-2025 and 2026-2030.

As the TSP draws to a close, the government has embarked on the development of the first NDS for the 2021-2025 period.

To date National Priorities for the period 2021-2025, as well as the National Development Results Framework and Sectoral Development Results Framework are under consultation.

The NDS formulation process was officially launched in April 2020 setting in motion the process for further development and fine tuning of the Draft National Priorities crafted by Government Technical Working Group; establishment of Sector Specific Thematic Working Groups in line with National Priorities for NDS; and carrying Stabilisation Programme (TSP) covering the period October 2018 to December 2020; and two successive Five-Year Development Strategies (NDSs) covering the periods 2021-2025 and 2026-2030. As the TSP draws to a close, the government has embarked on the development of the first NDS for the 2021-2025 period.

To date National Priorities for the period 2021 2025,6 as well as the National Development Results Framework and Sectoral Development Results Framework are under consultation.

The NDS formulation process was officially launched in April 2020 setting in motion the process for further development and fine tuning of the Draft National Priorities crafted by Government Technical Working Group; establishment of Sector Specific Thematic Working Groups in line with National Priorities for NDS; and carrying out National Consultations and drafting of NDS, which is targeted to be finalised by the 4th Quarter of 2020.

The pandemic is likely to affect every sector of the Zimbabwean economy and all segments of society but with differential impacts depending on age group, gender, disabilities, socioeconomic status, geographic location etc. In fact, pre-Covid-19, a large proportion of the population (2,2 million people or 76%, many of whom are youths) were employed in the informal economy.

With the lockdown and resulting job losses, we can anticipate that the informal sector will grow even larger.

The need to ensure that this group is targeted for support is crucial, as an asset for the development of the country In an attempt to understand the potential impact of the pandemic on Zimbabwe, it is instructive to note that although it is primarily a health crisis, it nonetheless has far-reaching public governance, socio-political and economic ramifications.

The AfDB-UN-WB consortium agreed to engage working groups to update the previously conducted Joint Needs Assessment to reflect recent developments in support of the approach paper prepared for the National Development Strategy.

Hence, the UN socio-economic framework for Zimbabwe will not include a separate in-depth socio-economic assessment. However, at the outset of this framew useful to reflect on a preliminary assessment of the impact of the pandemic on the Zimbabwean economy.

Growth is likely to be depressed further:

A stable macro-economic environment is a sine qua non for economic growth, investments, job creation and poverty reduction. The IMF currently estimates that Zimbabwe’s real GDP will contract by 7,4% in 2020. For a country whose economy contracted by an estimated 6,5% in 2019, continued contraction of this magnitude, more so given the fragility of the economy, would be disastrous, disproportionately affecting the poor and vulnerable, youth and young entrepreneurs, small and informal businesses, as well as small scale agricultural producers.

Delayed imports of goods, especially from China and South Africa, have led to shortages of basic consumer and intermediate goods thus fuelling inflationary pressures in the country.

Zimbabwe’s National Statistics Agency (ZIMSTAT)10 in its April 2020 prices survey highlights that, in the twelve months to April 2020, average prices went up by 766 percent, the cost of food increased by 985%, while health costs rose by 1 049%.

However, other sub-categories as education and housing, water and electricity recorded low increases at 233% and 457%respectively and therefore weighing down on the overall consumer price index (CPI).

Meanwhile, month-on-month inflation eased to 17,6% down from 26,6% in March 2020.

Consecutive years of drought did not only affect levels of food security, it impeded economic activities which rely on hydropower, production of which dropped to unprecedented levels.

Although foreign lending opportunities may be limited, Zimbabwe is likely to see a worsening debt situation as GDP shrinks and debt-to-GDP ratio worsens.

Effects of lower oil prices are likely to be offset by declining Forex earnings: Zimbabwe relies heavily on fuel imports to meet her total energy demand.

Crude oil Brent prices have declined sharply from US$69,6 per barrel on January 5, 2020 to the current (May 6, 2020) price of US$25.52 per barrel, a 63% decline.

Exports of goods, mainly primary commodities, which accounted for an estimated 22% of GDP in 2018 are expected to be adversely affected by direct and indirect linkages with the global economy, mainly China and European Union (EU) countries.

China remains an important destination for Zimbabwean exports, especially tobacco, which is likely to be adversely affected by economic slowdown in that country.

The 2020 tobacco season, which has recently started trading is therefore, expected to see reduced revenue this year.

China is also an important source of intermediate goods for South Africa, Zimbabwe’s main trading partner.

Any slowdown in economic activity in China will also affect the country indirectly via reduced trade with South Africa.

Meanwhile, the Chamber of Mines of Zimbabwe estimated that mineral production could decline by 60% in the first quarter of 2020 alone, as companies reduce output due to disruptions in the supply chain and logistics.

This could lead to a loss of US$400 million in revenues for the country.

Depressed activities in the mining sector will also adversely affect forex revenue since minerals account for at least one third of the country’s forex earnings.

Decline in tourism and remittances will lead to reduced forex earnings, job losses and access to basic services.

Tourism is a key sector for Zimbabwe’s economy, generating an estimated US$1,4 billion (3,3% of GDP) in revenue in 2018.

Currently, most of Zimbabwe’s tourism source countries have issued travel restrictions or are still in lockdown, resulting in the suspension of tourism activity.

Following the start of Zimbabwe’s lockdown, hotels and tourist attractions shut down altogether leading to loss of income, which will, inevitably, translate into job losses.

The Zimbabwe National Chamber of Commerce (ZNCC) estimates that the tourism sector will shed almost 25% of total jobs as a result of the pandemic. Zimbabwe also receives an estimated US$1 billion in remittances from its diaspora community annually.

Remittances are expected to decline as countries hosting significant numbers of Zimbabwe’s diaspora community, such as South Africa, are affected due to the current lockdown.

l This is an extract from a United Nations Development Programme (UNDP) paper titled: Immediate Socio-economic Response to Covid-19 in Zimbabwe (A Framework for Integrated Policy Analysis and Support) published on November 13.