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World Bank Says Zimbabwe Set to Record 3.9% Economic Growth in 2021 But Risks Remain

The World Bank (WB) is projecting that the Zimbabwe economy will this year grow by almost 4% even if the country is still facing some challenging, including the COVID-19 pandemic.

In a statement, the WB said Gross Domestic Product (GDP) growth in Zimbabwe is projected to reach 3.9 percent in 2021, a significant improvement after a two-year recession.

In a World Bank Zimbabwe Economic Update (ZEU) launched Thursday, the WB said economic growth this year “will be led by recovery of agriculture as rains normalize, businesses adjust to limitations caused by the COVID-19 (coronavirus) pandemic, and inflation slows down. “However, disruptions caused by the pandemic will continue to weigh on economic activity in Zimbabwe, limiting employment growth and improvements in living standards.”

The ZEU, Overcoming Economic challenges, Natural Disasters, and the Pandemic: Social and Economic Impacts, provides the World Bank perspective on macroeconomic and poverty developments and discusses ways to strengthen public service delivery in key sectors. This is the third economic update for Zimbabwe produced by the World Bank. Economic Updates are a standard World Bank tool for macroeconomic and fiscal monitoring.

“The ZEU notes that economic recovery is expected to strengthen further in 2022 with GDP growing at 5.1 percent as the deployment of vaccines intensifies and implementation of National Development Strategy 1 (2021-2025) bears fruits. Overall, the COVID-19 global contagion continues to pose significant downside risks, and thus the global and local outlook remains uncertain. A prolonged pandemic, weaker global demand, and heightened macroeconomic instability could choke economic growth, increase poverty, and worsen human capital development outcomes.

The World Bank said mitigating these risks requires domestic policies to strengthen and sustain macroeconomic stability – which is critical for consolidating economic recovery.

It says recent efforts to stabilize prices through rule-based monetary and exchange rate policies have been effective and must be continued and expanded. The World Bank noted that fiscal policies supportive of these efforts have focused on avoiding monetary financing and quasi-fiscal activities, reducing distortive subsidies, and improving fiscal and debt transparency.

The World Bank quoted its country manager, Mukami Kariuki, as saying, “Improving the country’s growth prospects will require further attention to policies that strengthen the quality of service delivery in the social sectors. Preserving lives during an unprecedented that protects livelihoods, strengthens social protection, improves food security, and ensures better education outcomes.”

According to the World Bank, facing tight public finances and limited recourse to external financing, Zimbabwe will need to rely mostly on reallocating domestic resources to optimal public uses and leveraging private financing and humanitarian support where possible.

The bank said addressing underlying challenges in health, education, social protection, and food security will require sustained financing, strengthened accountability frameworks and investments in appropriate management information systems.