New Market Research Report: Zimbabwe Business Forecast Report Q1 2013

Recently published research from Business Monitor International, "Zimbabwe Business Forecast Report Q1 2013", is now available at Fast Market Research

by Bill Thompson

(WireNews+Co) - Boston, MA - 05 January 2013

Core Views:

Zimbabwe's current account will remain in deep deficit until such time as foreign investment flows help finance a recovery for the domestic manufacturing industry, thus weaning the economy off its dependence on imports. In addition to constraining the recovery in the manufacturing sector, a dearth of financial account inflows means that the country's external accounts will remain in deficit and this will mean that external debt arrears will continue to build and that a return to a domestic currency will not be viable for some time yet.

We believe that the authorities are likely to have extremely limited fiscal resources at their disposal once again in 2013. Although tax revenues will increase in line with economic growth, this will not be sufficient to meet massive spending requirements. The situation will be worsened by the fact that the government's windfall from diamond mines will continue to be limited. Furthermore, although attempts to issue Treasury bills signal that the government has moved away from its no-borrowing regime of the last few years, a poor credit profile will mean that it will struggle to find lenders.

View Full Report Details and Table of Contents (http://www.fastmr.com/prod/513940_zimbabwe_business_forecast_report_q1_2013.aspx) (http://www.fastmr.com/prod/513940_zimbabwe_business_forecast_report_q1_2013.aspx)

Major Forecast Changes:

We have made downward adjustments to our long-term trend economic growth forecasts based on the fact that we think that the 'easy growth' driven by a recovery in exports and improved private consumption has run its course. Growth in 2013 is likely to benefit from the low base effect of a poor agriculture season in 2013 and we therefore see expansion at 6.0% y-o-y for the year. However, thereafter, we believe that trend growth will be around the 4.5% mark as productivity is unlikely to improve in the absence of foreign investment. The risks to our outlook are to the upside and stem from an improvement in the political and policy environment that would likely see investment flow rapidly into the economy. We have revised downwards our expectations for Zimbabwean inflation due to a depreciating South African rand and ongoing weakness in domestic demand. Whereas we previously saw price growth averaging 5.7% in 2013, we now believe that this will be closer to the 4.5% to 5.0% range. The risks to this view, however, remain weighted to the upside.

Key Risks To Outlook:

The political environment presents the most salient risk to our outlook for the Zimbabwean economy. If upcoming elections descend into violent chaos or if the security forces refuse to accept an MDC victory, our growth forecasts would likely be rendered too optimistic. On the other hand, if there is a quicker, more decisive resolution to ongoing political uncertainty, foreign investment would likely flow quickly into the country and would cause our forecasts to prove pessimistic.

There are significant policy risks. Premature abandonment of the foreign currency regime, for instance, would likely have a negative impact on the economy.

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