BY SHAME MAKOSHORI
FEARS of a complete dislocation of the fragile economy have mounted, with the Zimbabwe National Chamber of Commerce (ZNCC) projecting that the gross domestic product (GDP) could plummet by a staggering 12% this year, as Covid-19 paralyses production.
So deep are the fears among economists and business leaders that ZNCC CEO Christopher Mugaga has warned that the hyped National Development Strategy 1 (NDS1) will not defuse potential economic catastrophe, unless government reverses the
Covid-19 curve, which has been rising lately.
A recession is a slowdown or a massive contraction in economic activities, which may last for some quarters, thereby completely hampering the growth of an economy.
It is usually typified by a significant fall in spending.
There have been clear signs of sharp falls in spending since the economy slipped into a lockdown early January.
Almost all informal services players, making up about 60% of GDP, were forced to ground operations, hitting their incomes and potentially knocking revenues off consumer-facing enterprises.
Twinned with this fall were sharp spikes in retail prices, which courted the ire of the Confederation of Zimbabwe Retailers (CZR) last week.
The CZR called for stronger interventions to save the poor, who have been affected by the closure of informal businesses, which are estimated at over five million.
The Zimbabwe National Statics Agency says a family of five now requires over $20 000 per month to survive.
“The situation is bad,” Mugaga told Standardbusiness.
“What is needed is guidance for stability, not for growth. When you consider that 62% of the economy is in the services sector, then you can see how bad the situation is. The Ministry of Industry and Commerce has issued essential services letters to only 1 200 companies countrywide, which shows you the impact of the pandemic and the lockdown. We are in a quandary and we expect GDP to decline by between 8 and 12%,” Mugaga said.
The workforce will be redundant this year, and some businesses will not be able to adapt to the effects of Covid-19.
CZR boss Denford Mutashu warned against an escalation of poverty in the coming months, unless social safety nets were beefed up.
“Honourable Minister of Finance, I hope you have firm plans to summon resources to support the poor, informal traders, rural folks and the marginalised who have to bear the brunt of having to stay home under the ongoing strict lockdown,” Mutashu said.
“Your silence is deafening amidst a ravaging pandemic. It is time to summon the budget surplus towards lessening the burden over the poor majority through various social safety nets interventions,” he added.
In December, the Treasury boss had projected a 7,4% GDP growth this year, up from a 4,1% contraction, with year-on-year inflation targeted to fall to 135%, from 336% at the end of 2020.
Prospects for a good agricultural season were bright back in December, but this is now under threat from high rainfall.
CEO Africa Round Table chief executive officer Kipson Gundani said despite positive prospects in mining and agriculture, a serious downside risk exists on the consumption side due to the pandemic and lockdowns.
“Most entities that rely on domestic-driven consumption will suffer a huge knock in 2021,” he said.
At best, said Gundani, Zimbabwe’s economy will only grow by 3%, which is less than half of official projections.
His views were shared by Institute of Chartered Accounts of Zimbabwe CEO Gloria Zaravanhu, who said even a 3% growth may be a tall order, given the depressed demand, limited budgetary support, water and power shortages.