Download Zimbabwe Business Forecast Report Q2 2011 Brochure

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Zimbabwe Business Forecast Report Q2 2011
Description:
Finding A Recipe For Broad-Based Growth
Zimbabwe faces some uncertainty in 2011. Most notably, it is not clear when and in what climate the next
elections will be held. The uncertainty over the timing of elections, combined with the mixed policy
messages coming from the current coalition government, is weighing on the country’s ability to attract much
-needed investment. Also constraining economic activity is deficient infrastructure, with power cuts a
particular nuisance to the manufacturing sector. The sector is having a torrid time, also having to deal with
stiff competition from cheap imported goods and little access to finance for working and investment capital.
We maintain our view that elections will take place at some point in 2011 and that their success will hinge on
whether a constitution is adopted prior to the polls taking place. Of course, there is no guarantee that
elections will take place in 2011. The general populace is broadly against holding polls as the violence and
emotion of recent elections are still fresh in the national psyche and Zimbabweans are reluctant to expose
themselves to this once again. Furthermore, there is a belief among the business community that the
country’s nascent economic recovery is still too fragile to withstand the negative investor sentiment that
fresh elections would almost certainly bring. A ccording to the Finance Ministry, the economy expanded by
8.1% in real terms in 2010 despite a variety of challenges. However, heady headline growth is masking
ongoing weaknesses in the underlying economy. A large proportion of growth in 2010 was the result of
significant increases in output from the mining industry (which grew by 47% in 2010) and agricultural output
(which was 34% higher in 2010). While this is certainly positive – these sectors were mainstays of the
economy prior to the country’s economic decline – the feed-through to secondary and tertiary industries is
still relatively weak.
T he financial sector continues to operate sub-optimally. Although deposits have been growing strongly and
the loan-to-deposit ratio has increased to 68.8% in November 2010 from 55.0% in May, the majority of these
loans are prohibitively expensive and of too short a duration to be useful for meaningful investment. This,
together with a reticence on the part of international investors to plough money into certain sectors of the
economy, means that manufacturing firms do not have access to funds to expand capacity.
Contents:
Executive Summary
Finding A Recipe For Broad-based Growth
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
Political Scenarios For 2011
We maintain our view that elections will take place in 2011 and that the success of these will hinge on
whether a constitution is adopted prior to the polls taking place
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Navigating The Political Minefield
Zimbabwe faces many challenges as it seeks to end a decade of political turmoil
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
Finding A Recipe For Broad-Based Growth
Strong headline growth driven by mining and agriculture in Zimbabwe in 2010 conceals significant
weaknesses in the underlying economy
TABLE: ECONOMIC ACTIVITY
Table: QUALIFICATION CRITERIA FOR HIPC STATUS
Monetary Policy
Inflationary Pressures Remain Benign
Our view on Zimbabwean inflation remains unchanged: we expect headline price growth to be benign in
2011 as relatively weak domestic demand and excess capacity will help to keep inflationary pressures in
check
TABLE: MONETARY POLICY
Fiscal Policy
2011 Budget: Spending Constraints Remain
We believe Zimbabwe’s proposed 2011 budget is too optimistic on the amount of tax it will earn over the
course of the year and that the skew of spending towards recurrent as opposed to capital expenditure will
negatively impact the country’s recovery
TABLE FISCAL POLICY
Key Sector Outlook
Opportunities Amid The Risk
Agriculture and mining will maintain their status as pillars of the Zimbabwean economy
Chapter 3: 10-Year Forecast
The Zimbabwean Economy to 2020
Brimful With Potential And Political Risk
After a decade of economic contraction, we believe the Zimbabwean economy will see a decade of robust
growth if political stability is maintained
Chapter 4: Business Environment
TABLE: Long-Term Macroeconomic Forecasts
SWOT Analysis
BMI Business Environment Risk Ratings
Business Environment Outlook
Institutions
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS
TABLE: BMI LEGAL FRAMEWORK RATING
Infrastructure
TABLE: LABOUR FORCE QUALITY
Market Orientation
TABLE: MIDDLE EAST & AFRICA , ANNUAL FDI INFLOWS
Operational Risk
TABLE: TOP EXPORT DESTINATIONS
Chapter 5: BMI Global Assumptions
Global Outlook
Growth Solidifies, But Inflation Poses A Threat
table: Global Assump tions
TABLE : GLOBAL & REGIONAL REAL GDP GROWTH % CHG Y-O-Y
TABLE : CONSENSUS FORECASTS
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