Zimbabwe’s strong recovery from the 2000-2008 hyperinflation and economic contraction period gives hope for its return to the strong socio-economic performance and middle-income prospects, of the 1990s. However, growth has slowed sharply since 2012 as the economy’s vulnerability to climate change and terms of trade shocks resurfaced. In 2013, Zimbabwe adopted a new constitution and a new development plan, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimASSET). With a relatively well-educated workforce, abundant natural resources and developed infrastructure (albeit aging), the fundamentals for growth and poverty reduction are strong, provided the country can tackle its political fragilities, and build a consensus around inclusive and competitive investment policies.
The political and economic crises that characterized the economy between 2000 and 2008 contributed to the nearly halving of its gross domestic product (GDP), the sharpest contraction of its kind in a peacetime economy) and raising poverty rates of more than 72%, with a fifth of the population in extreme poverty. Health, education and other basic services, once regional models, largely collapsed and Zimbabwe’s Human Development Index (HDI) in 2011 stood at 173 out of 187 countries. A lengthy isolation from the international community had restricted aid flows and resulted in build-up of arrears to multilateral and bilateral partners.
In 2009, the country adopted a multicurrency regime (dollarization) that ushered in macroeconomic stability and positive economic growth. During 2009-12, the economy rebounded, with growth rates averaging around 8.7% per year. Inflation stabilized; revenues and bank deposits recovered sharply. The country also embarked on its first Staff Monitored Program with the International Monetary Fund (IMF) and began making ‘token’ payments on arrears to multilateral institutions.
Social services are recovering amid resurgent public and donor spending. Many social institutions are regaining their 1980s levels of sophistication. Zimbabwe’s HDI ranking recovered to 155 in 2015, and a Multi-Indicator Cluster Survey in 2014 revealed that in several key areas, Zimbabwe has regained outcome levels of the early 1990s. Underpinning this is also a reduction in HIV prevalence to around 15% since 2014 down from more than 40% in 1998. Life expectancy recovered from a low of 43.1 in 2003 to 53.3 in 2012 (compared with a high of 61.6 years in 1986, before the full extent of the AIDS pandemic). The maternal mortality rate declined from 960 deaths per 100,000 live births in 2010-2011 to an estimated 614 deaths in 2014; under-five mortality fell from 94 per 1,000 in 2009 to 75 in 2014. Despite this, Zimbabwe missed a significant number of the Millennium Development Goals.
Zimbabwe has enormous potential for sustained growth and poverty reduction given its generous endowment of natural resources, existing stock of public infrastructure and comparatively skilled human resources. Realizing this potential requires a further renewal of institutional and operational capacity in the public sector, further improvements in basic services delivery as well as deep reforms in economic policies and investment climate complimented by arrears clearance to international lenders.
Last Updated: Apr 07, 2016