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Covid-19 third wave threatens Zimbabwe economic recovery


BY BERNARD MPOFU

A third wave of the Covid-19 outbreak is likely to peg back Zimbabwe’s economic recovery driven by a good agricultural season, Finance minister Mthuli Ncube has warned.

After consecutive years of economic contraction caused by successive droughts and the outbreak of Covid-19, Zimbabwe’s economy is expected to bounce back this year.

The International Monetary Fund expects the southern African country’s economy to grow by 3.1 percent on the back of recoveries in the agriculture sector.

In the latest Treasury Quarterly Bulletin, Ncube said the projected recovery was in danger of being torpedoed by a resurgence in Covid-19 cases that would lead to economic disruptions.

“Developments during the last quarter of 2020 built on the economic recovery, which was witnessed during the third quarter shielding the economy from severe economic contraction,” he said.

“The normal to above rainfall pattern experienced during the first half of the 2020/21 agriculture season heralds better prospects of the economy through recovering agriculture and electricity generation activities.

“The Covid-19 pandemic, which has been a serious threat to recovery is being mitigated by a comprehensive vaccination programme, which is prioritising frontline staff and the key economic sectors. 

“The outbreak of a third wave, however, still poses a threat to the above recovery efforts. 

“Treasury will continue to monitor economic developments and provide updates.”

Zimbabwe first went into lockdown in March last year after the country recorded its first Covid-19 cases and this brought business to a halt for several months. 

The country was forced back into lockdown in January this year at the onset of a deadlier second wave of the outbreak of the disease. 

Restrictions were eased last month after Covid-19 cases declined significantly, but health experts warn that a third wave is likely, especially when the winter season sets in.

Ncube said economic recovery in the third quarter of last year was driven by the general improvement in macroeconomic conditions following the introduction of a number of fiscal, monetary, and structural policy measures. 

“The foreign currency market auction system provided a consistent market-based mechanism for distributing foreign currency to the productive sectors, which in a way also stabilised the local currency,” he said.

“Consequently, month-on-month inflation was successfully reduced to single digit levels over the course of the quarter.

“Further, the disbursements under the $18.2 billion stimulus package and the ongoing reform initiatives ensured that the economic activity peak during the fourth quarter of the year restoring previously lost production during the first half of the year 2020.”

Ncube added: “However, a resurgence of Covid-19, which was witnessed towards the end of the fourth quarter, poses a threat that requires mitigation in order to ensure achievement of set targets and goals on sustained economic recovery under the (National Development Strategy 1).”

In its economic outlook, the African Development Bank (AfDB), said Zimbabwe will also see 3.2% Gross Domestic Product growth in 2022. 

The regional lender said Zimbabwe will pin its hopes on sustained stability in the country’s banking system, which has increased capacity for lending and an improved agricultural season characterised by normal to above normal rains. 

However, AfDB said recovery will continue to be blighted by the Covid-19 pandemic.

“Modest economic recovery is projected in 2021, if effective measures are taken to stabilise foreign exchange and avoid excessive money creation.  

“But the outlook is clouded by a number of factors,” AfDB said, urging the government to ease border closures. 

“The pandemic and government policies to contain the (Covid-19) disease will affect   production levels across all sectors although a partial easing of border closures may help.”

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