DOMESTIC economic developments and outlook in the 2015 budget forecast a growth to 3,2% of the economy underpinned by stronger domestic demand as well as a recovery in external demand associated with growth in advanced economies.
According to a budget overview by local accounting firm Grant Thornton, the global economic growth is projected at 3,8% in 2015, a 0,5% positive movement from the 3,3% recorded in 2014, while the economic growth in Zimbabwe is projected to rise to 3,2% in 2015 from 3,1% in 2014.
The report noted that inflation remained very low, registering a price decline of 0,1% for the year to October 2014, against the background of weak domestic demand, tight liquidity conditions and the appreciation of the US dollar against the South African rand and was expected to remain subdued in 2015 after closing at 1% in 2014.
“The near negative inflation is reflective of the self-correction of the domestic price structure for goods and services which are higher than those prevailing in some of the neighbouring countries,” said the overview.
Despite the low inflation figures, the poverty datum line remains high in comparison to regional countries where Botswana, Malawi, Namibia and South Africa have figures of below $90 per individual while the local figure is $100,58.
The budget overview thus noted that cost management remains a strategic imperative across the economy, since domestic wages and prices were set with a mind-set of the hyper- inflationary environment.
However, gross domestic product (GDP) is still expected to rise in 2015 as all sectors have positive gains expected.
For 2015, agriculture, housing and fishing have a growth estimate figure of 3,4%, mining and quarrying (3,1%), manufacturing is forecast to strengthen by 1,7% while other sectors like distribution, hotels and restaurants — which has a growth estimate of 4,7% — are also expected to strengthen.
In general, GDP growth at market prices was estimated at 3,2%.
The report said the significant GDP growth for agriculture was as a result of expectations that the agricultural season would remain positive and production in the main crops, maize, tobacco and cotton, among others, was expected to remain on an upward trend.
“For tobacco sales, a total of $684,87 million was realised in 2014 compared to $610,31 million achieved in 2013, at an average price of $3,17/kg compared to $ 3,68/kg in 2013,” it says.
The transport and communication sector was estimated to have an overall growth of 4,1%, but separately, transport was said to be on the decline.
“The transport sector continued to decline and is expected to further go down by 1% in 2015,” it said.
Regardless of this regression, the sector is envisaged to strengthen on the basis of information and communications technology which is expected to grow by 6,4% in 2015.
The report explained how the 2014 budget focused on policy-oriented interventions and policy clarity which were meant to restore confidence, thereby creating a conducive environment for attracting investment into the economy.
However, it noted that foreign direct investment (FDI) remained subdued due to the perceived country risk.
“The country received $146,6 million in 2014 compared to $311,3 million the previous year,” the report states.
Despite this, the budget overview said FDI is projected to increase by 69% in 2015 from $349 million to $591 million, on the back of the continued implementation of the ease and cost of doing business reforms and the re-engagement process.