The economy is recovering in 2021 mainly boosted by higher agricultural production, improved capacity utilization in industry, and stabilization of prices and exchange rates. GDP is expected to rebound to 5.1% after a two-year contraction. The strong rebound is anchored by a better 2020/21 rain season, boosting agriculture, electricity, and water. Stabilizing prices, increasing investment in public infrastructure bolstered domestic demand.
Growth is expected to strengthen further in 2022 as the negative impacts of COVID-19 subside, rain levels remain good, and implementation of policies outlined in the National Development Strategy accelerates. Good vaccination progress is likely to boost tourism, trade, transport, and other sectors that were negatively affected by pandemic disruptions.
Continued implementation of disinflation policies and fine-tuning of the foreign exchange auction market are expected to keep average annual inflation at two-digit levels in 2022 and 2023. Annual inflation stood at 50% in August 2021 down from a high of 838% in July 2020 following the introduction of rule-based reserve money management, a foreign exchange auction, and relaxation of dedollarization. However, the widening gap between parallel market and official exchange rates is likely to weigh on price stability, with annual inflation expected to average 94% in 2021.
Zimbabwe received equivalent of US$961 from IMF SDR allocation, with an immediate impact of boosting gross international reserves which were critically low.
Improved economic environment eased social conditions although poverty levels remained high. With a significant proportion of households experiencing reduced or no income since the onset of the pandemic and the coverage of social assistance programs remains low. The number of people living below the international poverty line is expected to be 6.1 million in 2021 and to marginally decline in 2022, supported by expected economic growth and relatively lower inflation.
Project preparations are underway for the Health Emergency Preparedness Response Trust Fund to contribute to the National Vaccination and Deployment Strategy in response to a government request.
Following a decade of positive progress in human capital indicators, the pandemic has led to some deterioration in outcomes. Immediately after the onset of the pandemic, less than 30% of school-going children in rural areas engaged in education and learning compared with 70% for urban children. With the easing of lockdown and reopening of schools, most children are attending school. However, the pandemic continued to keep some children out of school, with teacher absenteeism being the primary reason (Zimstat, Rapid PICES phone surveys July 2020 and December 2020-March 2021). The health system is challenged by issues including doctor strikes, staff attrition particularly nurses, and inadequate quantities and slow access to personal protective equipment. Reduced frequency and timing of antenatal care visits may cause further deterioration in maternal and infant mortality. Households’ loss of access to basic social services and deepening of negative coping strategies risks undermining Zimbabwe’s relatively high human capital and the pace and inclusivity of economic growth.
The economic challenges and extraordinary shocks caused by the drought, cyclone, and the pandemic provide opportunities to press forward with measures to protect lives and livelihoods, and support Zimbabwe’s longer-term recovery. The NDS, sets out an ambitious plan to support the recovery. Zimbabwe’s domestic policies need to continue supporting price stability and the optimal use of public resources, especially given large financing needs to prevent a deterioration in human capital.
Last Updated: Nov 15, 2021