The African Development Bank (AfDB) has projected Zimbabwe’s inflation to drop from 184 percent in 2022 to 36.1 percent in 2024 as a result of Government’s tight monetary policy and global price decrease.
The AfDB said in its Southern Africa Economic Outlook report, in 2022, inflation rose in all countries except Angola, which benefited from an appreciation of its currency with the increase of oil exports, and Zambia, which embarked on an IMF support program to stabilize the economy.
“Inflation in the Southern Africa region is expected to halve to 6.7 percent in 2024, with the biggest deceleration expected to occur in Zimbabwe—from 184,1 per- cent in 2022 to 36,1 percent in 2024—as the Government maintains a tight monetary policy and global prices decrease,” the bank said.
“High poverty and inequality rates remain endemic across the southern Africa region.
“Madagascar (80,7%) and Zimbabwe (64,5%) are recording the highest poverty levels within their respective income group while Mauritius has the
lowest rate of poverty incidence (13,5%) within the upper-middle-income country group,” the bank said.
The bank said tightened US monetary policy, financial outflows from Africa, and weak external demand led to most African currencies depreciating against the US dollar in 2022, resulting in foreign exchange market instability, primarily in commodity exporting countries.
“Malawi and Zimbabwe had the worst performing currencies in Southern Africa, depreciating by 21 percent and 70 percent, exchange rate strengthened by almost 10 percent against the US dollar,” the bank said.
On the other hand, Afdb said the easing of global travel restrictions, imposed during the pandemic, contributed to a rebound in tourism in 2022, which fueled growth in some tourist reliant economies.
“The tourism industry played a role in mitigating the negative effects of hyperinflation and exchange rate instability on Zimbabwe’s GDP growth.”
It also said the fiscal deficit moderated a little in 2022 at 3,5% of GDP compared to 3,7% of GDP in 2021.
“No country in the region recorded a double-digit fiscal deficit, but all countries (except, Botswana, Madagascar and Zimbabwe) recorded fiscal deficit above the regional average deficit,” the report said.
The Afdb also noted that five countries have external debt level beyond the threshold of 60% of their GDPs.
“Zambia and Zimbabwe need urgent debt resolution, given the large external arrears and widening sovereign spread exacerbated by a thin domestic market,” it said.
“The outlook for 2023 and 2024 is uncertain because the southern Africa region remains subject to significant downside risks.”
It also noted that climate-related risks could also further worsen the projected economic and social outlook.
“The agriculture sector remains the largest employer in many countries in the region.
Environmental challenges hamper inclusive growth and food security and exacerbate existing social and political tensions.
“Weak institutional capacity of most countries — notably Madagascar, Malawi, Mozambique and Zimbabwe — to address climate vulnerabilities amplifies their vulnerability to more severe and frequent adverse climatic events,” the bank said.