2022 GDP growth estimates exceed target!

The estimates for 2022 Gross Domestic Product (GDP) released by the national statistics agency, Zimstat are out. The numbers represented a 6.5% growth at constant prices, which was above the 5.5% growth initially projected by the Ministry of Finance & Economic Development (MoFED) in the annual budget. These GDP numbers at constant prices are considered adjustments for inflation and exchange rate depreciation in the country.

Zimbabwe has been hit by high inflation levels, with the official exchange rate usually lagging behind the alternative parallel market rate. With over 65% of the economy estimated to be operating in the informal sector, the official numbers are also questionable. Nevertheless, this article is based on the official numbers. 

The Accommodation & Food Service Industry registered the highest growth of 23.7%. This sector is comprised of restaurants and hotel accommodations, and it is worth noting that the high growth is coming from a low base in 2021 which was disturbed by some Covid-19-induced lockdowns. The food services section was 60% whilst the accommodation constituted the remaining 40%. The tourism sector in general also benefitted from 100% retention on local foreign currency sales that was instituted early in 2022 and is projected to grow by 10% in 2023 buoyed by the recovery of international tourism.

The Mining and Quarrying sector also registered a modest growth of 11% in 2022 as global commodity prices were on the rise. This sector is a pivotal foreign currency earner for the country since most of the minerals are generally exported. Mining of metal ores contributed the lion’s share to this growth. Lithium registered a 236% growth whilst the Platinum Group Minerals (PGMs) output grew by 10%. Mining and Quarrying are projected to grow by another 10% in 2023 and the revenues are targeted to reach US$12 billion, but the advice has been that value addition might be essential to achieve this target.

The construction industry has generally been very active over the last half-decade, with government infrastructure projects spearheading activity. Private sector construction has also augmented the efforts of the government as other market players identified opportunities in the market. The growth in this sector at current prices was proxied by monitoring inputs like cement sales volume. However, the 2% growth was way below the 17.7% projected growth in the sector.

In terms of contributions towards the GDP numbers, the Wholesale, Retail & Trade sector had was the highest at 18.7%. The country has often been labelled a dumping site, where other nations like Japan and South Africa offload their finished products. In that sector, retail accounted for 54% whilst wholesale was 41% and Repair of motor vehicles and motorcycles came in just under 5%. This sector is also very prevalent in the informal sector and chances are that it could be bigger than what is captured.

There is a misconception amongst most economic agents that Zimbabwe is an agriculture-based economy. Although the impact of agriculture is then felt up the value chain in other sectors like manufacturing, its contribution to the economy’s GDP is often exaggerated. Agriculture contributed 12% towards the total output spearheaded by crop production. Despite late and erratic rainfall patterns in the 2021/22 agriculture season wheat, maize and soya beans registered 11%, 6% and 16% growth rates respectively. Livestock production was also significant contributing 15% of agriculture output. In 2023 MoFED projects a 4% growth on the back of above-normal rainfall patterns.

The manufacturing sector, which is dominated by tobacco and beverages manufacturing registered an 11% growth versus the 5.5% that was projected by the MoFED. The beverages manufacturing sector has been growing with the entrance of new players and the old established players recording all high volumes. Food products manufacturing contributed 19% whilst the manufacturing of metal products and machinery was 10%. Last year the Confederations of Zimbabwean Industries (CZI) indicated that the manufacturing sector had improved its capacity utilisation and benefited from the foreign currency auction system.

Despite the temporary suspension of lending during the year, the hike in interest rates and all challenges related to currency volatilities, the Finance and Insurance sector contributed 8% towards the national output. This sector plays a critical role in providing the necessary capital that fuels all the other sectors and its success is dependent on the success of the other sectors.

Overall, whether you agree that the Zimbabwean economy is growing or not, it is important to remember that the currency distortions make it very difficult to ascertain the fair estimates for the national output.