The year in retrospect and 2024 economic outlook

The economy recorded annual inflation rate of 101,5% in January 2023 and by June the annual inflation rate had reached 175,8%.

As the year comes to an end, we take stock of the key macro-economic trends and developments as well as preview the year 2024. The year 2023 has been a very eventful but challenging year for many on account of a number of factors.

At the global level, the global economy continues to experience slowing economic growth, high levels of inflation, high interest rates which affects the costs of borrowing, and rising public and private indebtedness.

The World Bank projects global economic growth to slow down to 2.1% in 2023 from an estimated 3.1% in 2022. Downside risks for the global economy include: geopolitical tensions (eg, the ongoing Russia-Ukraine war and the war between Israel and Hamas), volatile commodity and energy prices and debt distress in most economies.

Zimbabwe’s economic growth in 2023 is officially projected to slow down to 5.5% down from an estimated 6.5% in 2022 and 7.8% in 2021. According to a World Bank report titled Electrifying Growth Through Reliable and Universal Energy Access, Zimbabwe’s economy has seen a strong rebound since the Covid-19 pandemic, making it one of the fastest-growing economies in the Southern African Development Community (Sadc).

However, economic growth in the country over the past years has neither been employment-intensive nor poverty-reducing. Sustained economic growth is vital to sustaining financing of critical sector such as health, social protection, and water and sanitation.

The economy experienced chronic high inflation throughout the year. The economy recorded annual inflation rate of 101,5% in January 2023 and by June the annual inflation rate had reached 175,8%. By November 2023, the annual inflation rate had slowed down to 21,6% largely on account of the migration to the geometric aggregation methodology by the Zimbabwe National Statistics Agency (Zimstat).

Zimbabwe has the second highest annual inflation rate in the Sadc region after Malawi whose October 2023 inflation rate was 26,9%.

In Zambia, the November 2023 inflation rate was 12,9%, in South Africa it was 5,9%, while in Namibia it was 6,03%, and it was 3,1% in Botswana.

In the developed economies, inflationary pressures have been receding with the US November 2023 annual inflation rate at 3,1% from a high of 7,7% in October 2022; in the UK, annual inflation rate was 4,6% in November 2023 down from an all-time high of 11,1% in October 2022; while in the EU, annual inflation was 2,4% in November 2023 down from an all-time high of 11,5% in October 2022.

The economy experienced a bloodbath on the foreign exchange markets. The official exchange rate depreciated from a weighted average rate of ZW$801,60 to the United States dollar as at January 31, 2023, to ZW$5 739.79 as at June 29, 2023, (representing a 616% depreciation) and ZW$5 990,05 by November 28, 2023, (representing a 647% depreciation).

The depreciation of the local currency was a major driver of the chronic high inflationary trends. The Poverty Datum Line (PDL) per person rose from ZW$28 516,73 in November 2022 to ZW$115 090,00 in November 2023, representing a 303,6% annual increase; while it rose from ZW$105 072,00 in October 2023 to ZW$115 090,00 in November representing a 9,5% monthly increase. The erosion of purchasing power has exacerbated an already difficult situation for the poor and vulnerable.

Battered ... The Zimbabwean dollar has suffered a 647% depreciation against the US dollar this year alone.

The average minimum wage in Zimbabwe during the year 2023 was about US$230. In South Africa, according to the latest Quarterly Employment Statistics (QES) of June 2023, the average monthly earnings (including bonuses and overtime payments) was R25 994 (US$1 365,95) in May 2023.

This therefore creates a strong incentive for Zimbabwean professionals to migrate to South Africa and other countries where average earnings are higher than in Zimbabwe. The health sector has been the worst affected by the out-migration of professionals.

According to the World Health organization (WHO), Zimbabwe is among the 55 countries with sub-par numbers of health care workers. The out-migration of health professionals has also been driven by heavy workloads, high inflation, limited career development opportunities, challenging working conditions and inadequate tools of trade among others.

Poverty levels in general remain very high, and this has been exacerbated by the high levels of informality.

The food poverty rate increased steadily in the 2010s, starting at 23% in 2011, climbing to 30% in 2017 and 38% in 2019, and reaching its peak of 49% in July 2020, soon after the onset of the Covid-19 pandemic. The food poverty rate fell by six percentage points to 43% in 2021 on the back of economic recovery and record cereal production. This is far from Zimbabwe’s aspiration to reduce the share of the population below the food poverty line to 10% percent by 2025.

According to the 2023 Third Quarter Quarterly Labour Force Survey Report by Zimstat, informal employment constitutes 86,7% of total employment up from up from 75,6% in 2019. Informal employment is characterised by lower productivity, lower pay, limited social protection coverage, high levels of working poverty and poor working conditions in general.

The doing business environment remains very challenging and the country has a huge competitiveness gap. This implies that we are not producing enough, and even the little that we produce, we produce at a very high cost. The power crisis is causing Zimbabwean businesses and products to lose the competitive edge to imports as local products become even way more expensive than before.

The tax burden remains very high, and the 2024 National Budget will exacerbate that burden making the doing business environment even more challenging. Interest rates in Zimbabwe are the highest in the world with Bank policy rate of 130%, while the Medium-term Bank Accommodation (MBA) interest rate of 75% per annum.

This has made it very costly for companies to borrow money for productive purposes thereby weakening capacity utilisation across the economy. Key institutions remain weak and in need of reform. In particular, state-owned enterprises (SoEs) and parastatals are facing financial difficulties — with mounting losses and negative equity — which raise fiscal risks.

The country has been experiencing a cholera outbreak. The first cholera outbreak of 2023 started on February 12, 2023, in Chegutu town in Mashonaland West province. As of November 7, 2023, Zimbabwe has recorded 6 685 suspected cholera cases and 136 suspected deaths.

Cholera is a water and food-borne disease with person-to-person transmission resulting from poor hygiene, limited access to sanitation, and inadequate water supply, which all contribute to the rapid progression of an outbreak.

The Global Task Force on Cholera Control considers water, sanitation and hygiene investments as the foundation to achieving the goal of reducing cholera deaths by 90% by 2030. There is therefore a need for the country to improve public investments in water, sanitation and hygiene as the current investment is grossly inadequate.

The year 2024 is expected to be more challenging than the year 2023. The El Nino weather pattern will have both recessionary and inflationary impacts on the economy. Economic growth is projected to slow down to 3,5% in 2024, a decrease from 5,5% in 2023. The World Bank simulations show that achieving upper middle-income status by 2030 will require economic growth rate of at least 15% per annum over the period 2023-2030.

  • Dr Chitambara is a development economist based in Harare. These weekly New Perspectives articles, published in the Zimbabwe Independent, are co-ordinated by Lovemore Kadenge, an independent consultant, managing consultant of Zawale Consultants (Pvt) Ltd, past president of the Zimbabwe Economics Society and past president of the Chartered Governance & Accountancy Institute in Zimbabwe (CGI Zimbabwe). — [email protected] or +263 772 382 852.


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