natural disasters, and pandemic have con- tributed to the high rate of poverty and ZIMBABWE Key conditions and vulnerability in Zimbabwe. challenges Table 1 2022 Zimbabwe’s economic development con- Recent developments Population, million 16.3 tinues to be hampered by price and ex- GDP, current US$ billion 20.7 change rate instability, misallocation of Real GDP slowed to 3.4 percent in 2022 GDP per capita, current US$ 1267.0 productive resources, high informality, from 8.5 percent in 2021 on the back of a 39.8 International poverty rate ($2.15) low investment, and limited structural worsening agriculture conditions and a 64.5 transformation. High inflation, multiple price and exchange rate instability. Due to Lower middle-income poverty rate ($3.65) a 85.0 exchange rates, unsustainable debt levels, low rainfall, agriculture output contracted Upper middle-income poverty rate ($6.85) Gini index a 50.3 and ineffective control over government by 14 percent, after growing at double dig- School enrollment, primary (% gross) b 96.1 spending have increased the cost of pro- its in 2021. Triple digit inflation con- b 61.1 duction, reduced incentives for produc- strained private sector demand, while fis- Life expectancy at birth, years tivity-enhancing investment, and encour- cal austerity limited growth of government Total GHG emissions (mtCO2e) 122.9 aged informality. Trade integration has demand and investment. Mineral ex- Source: WDI, Macro Poverty Outlook, and official data. declined, and foreign direct investment porters benefited from high global prices a/ Most recent value (2019), 2017 PPPs. b/ WDI for School enrollment (2021); Life expectancy (FDI) remains low, limiting transfer of and together with tourism contributed (2020). new technologies and investment in mod- most to overall economic growth. ernizing the economy. Inflation returned to triple digits, albeit de- High unsustainable debt and arrears to clining since August 2022, fueled by broad international financial institutions (IFIs) money expansion and surge in global Real GDP growth is estimated to have limit Zimbabwe’s growth potential. Exter- prices. Russia’s invasion of Ukraine, nal debt is estimated at 107 percent of through high food and energy prices, has slowed to 3.4 percent in 2022 on the back GDP in 2022. The government has pre- exacerbated domestic inflationary pres- of worsening agriculture conditions and pared an Arrears Clearance, Debt Relief sures that emanated from lose monetary macroeconomic instability. Annual infla- and Restructuring Strategy, resumed to- policy and quasi-fiscal operations, with an- tion returned to triple digit levels in ken payments to IFIs and Paris Club cred- nual inflation returning to triple digits in itors, and initiated a high-level structured May 2022. End of period inflation reached 2022, driven by both monetary expansion Dialogue Platform with creditors and de- 244 percent in 2022. However, monetary and external shocks. Poverty levels, albeit velopment partners. tightening, including sharp hike in interest declining, remained elevated. Economic Although it has declined since its peak of rates, and fiscal policy measures brought growth is projected to slow to 2.9 percent 2020, extreme poverty remains high in the inflation down to 230 percent in January in 2023 and remain subdued in the medi- context of cyclical agricultural production 2023. Further, the relative relaxation on and elevated food prices. Persistent infla- foreign currency auction controls con- um term, reflecting global shocks and tributed to declining parallel market pre- tion, high dependence on low-productivi- structural bottlenecks. ty agriculture, slow structural transforma- mium from over 93 percent in July 2022 to tion, and intermittent shocks like drought, 30 percent in February 2023. Despite still FIGURE 1 Zimbabwe / Exchange rates FIGURE 2 Zimbabwe / Actual and projected poverty rates and real GDP per capita ZWL$/US$ Poverty rate (%) Real GDP per capita (constant LCU) 1200 100 16000 90 14000 1000 80 12000 800 70 60 10000 600 50 8000 40 6000 400 30 4000 200 20 10 2000 0 0 0 Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23 2011 2013 2015 2017 2019 2021 2023 2025 Official exchange rate Parallel market exchange rate International poverty rate Lower middle-income pov. rate Interbank market exchange rate Upper middle-income pov. rate Real GDP pc Sources: Zimstat and World Bank staff estimates. Source: World Bank. Notes: see Table 2. MPO 1 Apr 23 high inflation, the Central Bank reduced marginal decline in the international The fiscal deficit is projected to increase the interest rate from 200 percent per an- poverty rate. Nevertheless, about 6.2 mil- in 2023, reflecting election spending pres- num to 150 percent in February 2023. lion people lived below the international sures. Higher wages and transfers will dri- The fiscal deficit was contained for a fourth poverty line in 2022. ve expenditure while investments in pub- year in a row, but quasi-fiscal operations lic infrastructure are expected to be moder- continued. The fiscal deficit is estimated at ate. Revenue will continue to benefit from 1.5 percent of GDP in 2022, from 1.7 per- high inflation and exchange rate depreci- cent in 2021. Additional spending driven Outlook ation. With limited access to concessional by inflation was matched by higher rev- financing and rising costs of commercial enue. The large part of additional spend- Real GDP growth is projected to slow fur- financing, financing of future deficits will ing was allocated for wages, public invest- ther to 2.9 percent in 2023 and remain become more difficult, necessitating fur- ment, procurement of grain, and social subdued in the medium term, reflecting ther fiscal consolidation. The current ac- protection. Revenues increased significant- global shocks, structural bottlenecks, and count surplus will continue shrinking, re- ly due to high inflation and exchange rate price and exchange rate instability. flecting increase in imports and slowdown valuation gains as some of the taxes (45 Growth in 2023 will be driven mostly in remittances inflows. percent) were collected in U.S. dollars. by agriculture, mining, and further recov- The international poverty rate is expected The current account remained in surplus ery of tourism and other related services. to decline modestly in the medium term though narrowing from 1.5 percent of GDP Agriculture output is expected to grow along with the projected increase in GDP in 2021 to 1.1 percent in 2022 as trade on account of better rains, but costly in- per capita. Although the agriculture sec- deficit widened. The merchandise trade puts and financing issues are likely to tor is expected to do relatively well deficit increased sharply as import growth weigh on yields of key crops. thanks to the timely rain, high food prices continued to outpace growth of exports on Downside risks to the outlook are high re- and slow economic growth will continue the back of high global prices. However, flecting potential policy loosening prior to to retard the pace of poverty reduction. strong remittances and improvements in elections, sharp global slowdown of Breaking the correlation of household tourism receipts from abroad kept the cur- growth, volatile commodity prices, and cli- welfare with the weather cycles, increas- rent account in surplus. mate change. Inflation will slow down but ing labor productivity through capital The job loss and economic disruptions as- remain in triple-digits in 2023. Further deepening and structural transformation, sociated with the COVID-19 pandemic monetary tightening and liberalization of and instituting a robust social protection have mostly dissipated. The modest eco- the exchange rate could bring inflation to system are the structural priorities to re- nomic growth in 2022 translated into a double-digit levels from 2024. duce poverty and vulnerability. TABLE 2 Zimbabwe / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022e 2023f 2024f 2025f Real GDP growth, at constant market prices -7.8 8.5 3.4 2.9 3.4 3.4 Private Consumption -2.7 4.7 3.4 3.5 3.2 3.2 Government Consumption -23.8 142.1 0.8 2.6 1.9 2.2 Gross Fixed Capital Investment -4.1 -3.8 6.9 1.1 5.6 5.3 Exports, Goods and Services -39.8 41.1 6.0 2.8 3.8 3.8 Imports, Goods and Services -29.0 54.8 5.5 3.1 3.1 3.1 Real GDP growth, at constant factor prices -7.7 8.4 3.4 2.9 3.4 3.4 Agriculture 4.1 17.5 -14.1 3.0 3.4 3.4 Industry -8.2 6.4 7.4 3.3 3.5 3.7 Services -9.6 7.7 5.1 2.7 3.3 3.2 Inflation (Consumer Price Index) 557.2 98.5 193.4 124.0 74.0 54.0 Current Account Balance (% of GDP) 3.0 1.5 1.1 0.4 0.7 0.5 Net Foreign Direct Investment Inflow (% of GDP) 0.7 0.4 0.8 0.7 0.6 0.5 Fiscal Balance (% of GDP) 1.5 -1.7 -1.5 -1.7 -1.5 -1.5 Revenues (% of GDP) 13.3 15.2 18.9 17.6 17.5 17.8 Debt (% of GDP) 92.1 81.7 111.6 106.2 87.2 79.2 Primary Balance (% of GDP) 1.5 -1.7 -1.4 -1.6 -1.1 -1.4 a,b International poverty rate ($2.15 in 2017 PPP) 43.9 41.4 40.8 40.5 40.0 39.5 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 68.1 65.8 65.4 65.2 64.8 64.1 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 86.9 85.6 85.4 85.3 85.1 84.9 GHG emissions growth (mtCO2e) -1.3 3.2 2.3 1.6 1.7 1.8 Energy related GHG emissions (% of total) 10.7 11.4 12.1 12.2 12.3 12.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2019-PICES. Actual data: 2019. Nowcast: 2020-2022. Forecasts are from 2023 to 2025. b/ Projection using neutral distribution (2019) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 2 Apr 23