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Zimbabwe Business Forecast Report Q4 2014

  • August 2014
  • -
  • Business Monitor International
  • -
  • 33 pages

Core Views
Challenges for Zimbabwe’s economy continue to mount and we have downgraded our 2014 and 2015 growth forecasts to 1.7% and 2.2% respectively from 3.1% and 3.3% previously. Only a real contraction in imports, on the back of weak domestic demand, has prevented us from revising the headline forecast into negative territory. Lower historic and forecast current account deficits do not indicate a stabilisation of the external accounts. They are rather the result of weak import demand that is a stark illustration of the difficulties being faced by the Zimbabwean economy.

Inflation in Zimbabwe will remain in negative or very low positive territory over the coming 12 months. The extent to which this boosts purchasing power will be limited by the effect that rand weakness has had on the dollar value of remittances from South Africa.

Major Forecast Changes
We have downgraded our 2014 and 2015 growth forecasts to 1.7% and 2.2% respectively from 3.1% and 3.3% previously.

Table Of Contents

Zimbabwe Business Forecast Report Q4 2014
Executive Summary 5
Core Views...5
Major Forecast Changes.5
Key Risks To Outlook5
Chapter 1: Political Outlook.. 7
BMI Political Risk Ratings.. 7
SWOT Analysis 7
Domestic Politics 8
ZANU-PF Succession Battle Entering Volatile Waters..8
There continues to be little clarity on who will succeed President Robert Mugabe as leader of Zimbabwe's ruling ZANU-PF party. Party
elections in December 2014, where several senior positions will be up for grabs, will shed limited light on the succession question
as party hierarchy will be only one of many variables that will determine who takes the helm. The recent entry of Mugabe's wife into
frontline politics introduces a new dimension to the battle.
TABLE: POLITICAL OVERVIEW ....8
Long-Term Political Outlook... 9
Mugabe's New Term's Key Challenges..9
Zimbabwe faces an uncertain political future following the resounding victory of President Robert Mugabe and his ZANU-PF party in
the 2013. The main policy issues are likely to be the party's drive to indigenise the economy; questions about the independence of the
judiciary and security services; and the Zimbabwean government's turbulent relationship with the West. The race to succeed the ageing
Mugabe will also feature prominently in the years ahead.
Chapter 2: Economic Outlook.. 13
BMI Economic Risk Ratings.. 13
SWOT Analysis... 13
Economic Activity... 14
Declining Imports To Keep Growth From Negative Territory14
Challenges for Zimbabwe's economy continue to mount and we have downgraded our 2014 and 2015 growth forecasts to 1.7% and
2.2% respectively from 3.1% and 3.3% previously. Only a real contraction in imports, on the back of weak domestic demand, has
prevented us from revising the headline forecast into negative territory.
table: Economic Activity14
Balance Of Payments .. 15
Falling Current Account Deficit Not A Good Sign...15
Lower historic and forecast current account deficits in Zimbabwe do not indicate a stabilisation of the external accounts. They are rather
the result of weak import demand that is a stark illustration of the difficulties being faced by the Zimbabwean economy.
Table: Current Account.16
Monetary Policy . 17
Purchasing Power Not Benefitting From Deflation.17
Inflation in Zimbabwe will remain in negative or very low positive territory over the coming 12 months. The extent to which this boosts
purchasing power will be limited by the effect that rand weakness has had on the dollar value of remittances from South Africa. The
mooted adoption of the rand as Zimbabwe's official currency is a potential solution to this and other economic issues. However, it would
not be a panacea given that investment inflows will continue to depend on foreign investor perceptions of Zimbabwean policies.
Table: Monetary Policy..17
Banking Sector .. 19
New Governor Offers Hope To Beleaguered Banks ...19
An uptick in banking sector asset growth during early 2014 is temporary and we believe that the Zimbabwean banking sector will
continue to face significant challenges over the remainder of the year. One reason for optimism stems from the fact that the new central
bank governor seems to be cognisant of the main challenges for the banking sector.
Chapter 3: 10-Year Forecast 21
The Zimbabwean Economy To 2023.... 21
Policy Risks To Constrain Long-Term GDP Growth....21
The performance of the Zimbabwean economy will remain inextricably linked to the policy and political climate over the coming years.
Although the trajectory of this is difficult to predict, at this juncture we believe that the economy will expand but only at a very subdued
rate as much -needed foreign investment will remain at bay owing to nationalistic policies of the ZANU-PF dominated government.
table: Long-Term Macroeconomic Forecasts...21
Chapter 4: Business Environment 23
BMI Business Environment Risk Ratings 23
SWOT Analysis... 23
Business Environment Outlook. 24
Institutions 24
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS....24
Table: BMI LEGAL FRAMEWORK RATING....25
Infrastructure. 26
Table: LABOUR FORCE QUALITY..26
TABLE: AFRICA - ANNUAL FDI INFLOWS.27
Table: TRADE AND INVESTMENT RATINGS28
Market Orientation... 29
Operational Risk. 30
TABLE: TOP EXPORT DESTINATIONS (USDmn)30
Chapter 5: BMI Global Assumptions. 31
Global Outlook.... 31
US Revision Drags Down Forecast.31
Table: Global Assumptions31
Tabl e: Develop ed Stat es, Real GDP Growt H, %..32
Tabl e: BMI VE RSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %.. 32
Tabl e: Em erging Mar kets , Real GDP Growth , %.33

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