Zimbabwe’s economy is projected to contract by around 8 percent this year due to the impact of the COVID-19 pandemic, but will modestly recover in 2021, the African Development Bank (AfDB) said Wednesday.
The regional bank had previously projected the southern African country’s economy to grow by 4.6 percent this year and 5.6 percent in 2021, if corrective measures were taken.
“But production is now expected to fall in both sectors, largely due to the outbreak of the pandemic and associated shocks and policy actions to limit the infections,” the bank said in its latest African Economic Outlook 2020 supplement report.
It added that reductions in tourism earnings will exacerbate foreign exchange shortages in the country, state news agency New Ziana reported.
“As a result, the economy is projected in 2020 to contract by between 7.5 percent if the pandemic subsides by July (baseline) and 8.5 percent if it continues through to December (worst case), with modest recoveries in 2021,” it said.
The pan-African bank said fiscal deficit would remain above 5 percent due to the negative effects of the tax relief measures and weak business activity.
The Zimbabwe Revenue Authority has reported that the COVID-19 pandemic has greatly affected revenue collection with revenue targets likely to be missed this year.
The deterioration of the trade balance and secondary income account will push the current account to a deficit territory of 2 percent of GDP this year, which could widen further to 2.7 percent, wiping out a surplus of 1.1 percent posted in 2019, the bank said.
Riding on its abundant natural resources, relatively good public infrastructure and skilled workforce, the AfDB said Zimbabwe could emerge from the current health and economic crisis strongly.
“The country’s vast natural resources, public infrastructure still in relatively good condition, and a skilled labor force give the country an opportunity to join supply chains in Africa and increase trade within the context of the African Continental Free Trade Area,” it said.
The AfDB said African countries highly dependent on tourism for export revenues were expected to be more vulnerable than others.