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Deepening EU Financial Crisis to Hit Zimbabwe, Southern Africa Hard

The World Bank says Southern African economies, including Zimbabwe, will be hit hard by any further deterioration of the European Union financial crisis and economic slowdown in China.

In its latest global economic report, the bank said medium-term economic prospects for the region remain robust though this may be derailed by negative developments in Europe where various nations have been forced to adopt tough austerity measures to contain the financial crisis.

The bank said if global growth weakens, commodity prices could decline, hitting hard exporters of industrial raw materials like metal and cotton and tourism-dependent economies in the region.

It further said in a crisis situation, weaker capital inflows, remittances and aid inflows could also decline sharply – potentially compromising macro-economic stability.

Zimbabwe is among Southern African nations exporting valuable minerals to Asia and other regions.

Economist Anthony Hawkins of the University of Zimbabwe’s Business School said though the deterioration of the financial crisis in Europe will have a long-term devastating effect on Zimbabwe.

The country’s leadership has failed to come up with policies hedging it against negative international forces.

Masimba Kuchera of the Zimbabwe Coalition on Debt and Development agreed, noting that lack of export earnings and remittances from Europe would cripple Zimbabwe.

The bank said domestic demand for goods and services in Sub-Saharan Africa is projected to remain robust and growth is expected to strengthen to 5 percent in 2012, 5.3 percent in 2013 and 5.2 percent in 2014. The region recorded a 4.7 percent growth last year, down from 5 percent in 2010.