Government should ride on the goodwill that led to the adoption of the Lima debt clearance strategy by international creditors and fast track reforms aimed at improving the doing business environment in order to ensure a positive economic outlook for the year, investment analysts have said.
Presenting a paper on Zimbabwe 2016 economic outlook at a symposium hosted by The Herald Business and the Confederation of Zimbabwe Industries last week, Intellego Investment Consultants managing partner Mr Welcome Mavingire said a number of positives are expected this year but challenges will not easily disappear.
Among the challenges are fiscal space constraints and deflation and a general global economic downturn due to the falling commodity prices.
“(In terms of the aftermath of Lima); if the debt clearance strategy that was agreed to last year goes through and is implemented, we see this as a big positive going forward for the economy. There have also been a lot of reforms that have been happening within Government especially to do with the ease of doing business to try to facilitate foreign direct investment. We also see that as a huge positive,” said Mr Mavingire.
“We also expect the Reserve Bank of Zimbabwe to start playing its role in terms of monetary policy because all these years it has been constrained either because of the capitalisation issues and also the instrument that it can use but we expect going forward there could be some intervention coming from there,” he said.
Fiscal space constraints continue as a challenge but Government is making efforts to ensure the situation normalises. Some of the measures that Government is implementing include clearing arrears with international finance institutions to unlock new capital.
Reforms to improve the doing business environment are at an advanced stage as Government also seeks to attract local and foreign direct investment.
“There are also issues to do with fiscal space; I think that’s a worry in terms of Government revenue viz-a-vis the expenditures. It could continue being an issue.
“We also think that deflation will continue affecting the economy. Coming from a hyperinflation environment you tend to think that deflation is a blessing but probably it could be a bigger problem than inflation of hyperinflation if you see the way it affects companies and economic growth. Results of companies are most likely to be below expectation because of the factors that prevailed last year,” said Mr Mavingire.
The investment consultants forecast a 2,7 percent GDP growth this year.
Financial markets are expected to slow down due to deflation and in the area of fixed income markets, the investments analysts expect Government to start issuing debt paper through the formal market.
“On the equities market we expect at best to be static because of the wait and see attitude from investors,” said Mr Mavingire.
Source: Conrad Mwanawashe for AllAfrica