THE Zim economy slipped into recession late in 2015 due to a crippling drought, weakened international demand for key mineral exports and limited investment opportunities, a US-based international business monitoring group has said.
In a new report released on Tuesday, Business Monitor International (BMI) said the deflationary conditions experienced in Zimbabwe for the past two years will persist throughout 2016.
BMI said the recession was due to, among other reasons, subdued domestic demand, weak international commodity prices and the consequences of the dominance of the weakened South African currency, the Rand.
“We estimate that the Zimbabwean economy slipped into recession in 2015 driven by a crippling drought, weak demand for key mineral exports (ie gold and diamonds) and limited investment opportunities,” said BMI.
“We expect only a minor improvement over the coming quarters, with economic conditions set to remain highly challenging owing to both domestic and external headwinds.
“Political and policy uncertainty will continue to deter much-needed investment into the moribund Zimbabwean economy, while a weak harvest, depreciating South African rand and lower commodity prices will also weigh on short-term economic activity,” BMI said in its analysis.
Further, the group said internal divisions within the ruling Zanu PF party risked engulfing the country in violent power struggles.
“The succession of President Robert Mugabe risks turning violent if plans are not put in place and set in motion prior to his departure, as competing vested interests struggle to fill the power vacuum left in his wake,” the report said.
The report said growing signs of internal divisions in the ruling Zanu-PF added to existing uncertainty over the future of politics in Zimbabwe once Mugabe retires or dies.
“Against this backdrop, a worsening economic climate will put added pressure on government stability,” the report said.
The internal power struggle for the succession of the nonagenarian has divided the ruling party into two bitterly opposed camps which have in recent months held parallel meetings and had public disagreements.
One faction is believed to be led by one of the two vice presidents and long-time Mugabe confidant Emmerson Mnangagwa while First Lady Grace Mugabe leads a faction of young party leaders.
The disagreements have led to government discord and inconsistencies in the formulation of key legislation such as the contentious indigenisation law, the mining tax regime and determination of custom duty on imports and the meagre exports. – ANA