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Zimbabwe Zimbabwe at a Glance: 2004-05

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Zimbabwe Zimbabwe at a Glance: 2004-05 Country Report Zimbabwe Zimbabwe at a glance: 2004-05 OVERVIEW It seems increasingly unlikely that the president, Robert Mugabe, will countenance any serious negotiations between his ruling Zimbabwe African National Union-Patriotic Front (ZANU-PF) and the opposition Movement for Democratic Change (MDC). Instead, given the powers of incumbency, the government!s control of the election process, and the range of repressive legislation at his disposal, he is confident that his party can win a sizeable majority in the parliamentary elections scheduled for March 2005. Although the government does not have what could be called a coherent economic policy in place, it has put together a strategy that is helping to slow the economic decline. The key to this has been the introduction of a range of exchange rates, which have sharply increased the inflows of foreign exchange passing though official channels. Against the background of a modest increase in maize production, we expect the recent rapid decline in real GDP to slow over the forecast period, real GDP contracting by 8.2% in 2004 and 3.1% in 2005. Key changes from last month Political outlook • The government has officially announced that it will not apply for international food aid this year and has stressed the success of its land reform programme. Although we do not expect domestic production to meet demand, owing to higher inflows of foreign exchange through official channels the government should be able to import enough food by itself. This will give it absolute control over its distribution in the run-up to the March 2005 elections. Economic policy outlook • The government has increasingly started to assert that its policies are turning the economy around. Although this is clearly not the case, it does seem that the economic decline is now starting to slow. Economic forecast • The stabilisation of the inflation rate in the first quarter of 2004 has led us to revise our inflation forecast. Even if inflation picks up in the second half of the year as food shortages re-emerge, we expect it to average 471% in 2004 and to remain high at 452% in 2005 as higher government spending offsets increased food production. June 2004 The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where the latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 15 Regent St The Economist Building 60/F, Central Plaza London 111 West 57th Street 18 Harbour Road SW1Y 4LR New York Wanchai United Kingdom NY 10019, US Hong Kong Tel: (44.20) 7830 1007 Tel: (1.212) 554 0600 Tel: (852) 2585 3888 Fax: (44.20) 7830 1023 Fax: (1.212) 586 0248 Fax: (852) 2802 7638 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] Website: www.eiu.com Electronic delivery This publication can be viewed by subscribing online at www.store.eiu.com Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, online databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office Copyright © 2004 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author's and the publisher's ability. However, the Economist Intelligence Unit does not accept responsibility for any loss arising from reliance on it. ISSN 1350-7095 Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Patersons Dartford, Questor Trade Park, 151 Avery Way, Dartford, Kent DA1 1JS, UK. Zimbabwe 1 Contents Zimbabwe 3 Summary 4 Political structure 5 Economic structure 5 Annual indicators 6 Quarterly indicators 7 Outlook for 2004-05 7 Political outlook 9 Economic policy outlook 11 Economic forecast 14 The political scene 22 Economic policy 27 The domestic economy 27 Economic trends 28 Agriculture 31 Manufacturing 32 Mining 32 Foreign trade and payments List of tables 11 International assumptions summary 13 Forecast summary 26 Foreign-exchange inflows to the Reserve Bank of Zimbabwe 27 Inflation 30 Tobacco auction sales 31 Manufacturing production 33 External debt List of figures 13 Gross domestic product 13 Consumer price inflation 28 Auction rate 33 Changes in Zimbabwe!s debt stock Country Report June 2004 www.eiu.com © The Economist Intelligence Unit Limited 2004 Zimbabwe 3 Zimbabwe June 2004 Summary Outlook for 2004-05 It seems increasingly unlikely that the president, Robert Mugabe, will countenance any serious negotiations between his ruling Zimbabwe African National Union-Patriotic Front (ZANU-PF) and the opposition Movement for Democratic Change (MDC). Instead, given the powers of incumbency, the government!s control of the election process, and the range of repressive legislation at his disposal, he is confident that his party can win a sizeable majority in the parliamentary elections scheduled for March 2005. Although the government does not have what could be called a coherent economic policy in place, it has put together a strategy that is helping to slow the economic decline. The key to this has been the introduction of a range of exchange rates, which have sharply increased inflows of foreign exchange passing though official channels. Against the background of a modest increase in maize production, we expect the recent rapid decline in real GDP to slow in 2004-05, with real GDP contracting by 8.2% in 2004 and 3.1% in 2005. The political scene Zimbabwe!s ruling elite has been shaken by the anti-corruption crackdown launched by Mr Mugabe. The president has sought to restore order within ZANU-PF through the arrest of a number of leading politicians and businessmen. Two by-election defeats have increased the pressure on the MDC as it searches for a new political strategy. The government has started to amend the electoral act, which will further improve its chances of winning the 2005 parliamentary elections. The international community is still struggling to reach a consensus on how best to resolve the country!s deepening political crisis. Economic policy The government has increasingly tried to assert that the new policies it has introduced are beginning to turn the economy around. Although the economic decline may be slowing, there are likely to be significant food shortages again in late 2004 and into 2005, contrary to the claims of the government. The government has re-introduced the tobacco and gold price support schemes as well as a new system to encourage remittances from the Zimbabwean diaspora. The domestic economy Inflation has started to stabilise, but it was still at over 500% in April. The Zimbabwe dollar auction rate has continued to drift down steadily during the first half of 2004. The government has announced plans to nationalise all land, but has set no firm deadlines for the process. Foreign trade and payments New data from the World Bank show that external debt rose to US$4bn at end- 2002, owing to rising arrears and the weakness of the US dollar on international markets. Editors: David Cowan (editor); Pratibha Thaker (consulting editor) Editorial closing date: June 9th 2004 All queries: Tel: (44.20) 7830 1007 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule Country Report June 2004 www.eiu.com © The Economist Intelligence Unit Limited 2004 4 Zimbabwe Political structure Official name Republic of Zimbabwe Form of state Unitary republic Legal system Based on Roman-Dutch law and the 1979 constitution National legislature House of Assembly with 150 members, 120 of whom represent geographical constituencies and are elected by universal adult suffrage every five years; 8 are provincial governors, 10 are customary chiefs and 12 others are appointed by the president National elections June 2000 (legislative) and March 2002 (presidential); the next elections are provisionally scheduled for March 2005 (legislative) and March 2008 (presidential) Head of state President, elected by universal suffrage for a six-year term National government The president and his appointed cabinet; last major reshuffle February 2004 Main political parties Zimbabwe African National Union-Patriotic Front (ZANU-PF), the ruling party since 1980, governed by a 138-member Central Committee and a 24-member Political Bureau (Politburo), holds 62 seats in parliament. The Movement for Democratic Change (MDC), formed by the trade union movement in September 1999, emerged as the main opposition party following the June 2000 election and has 57 seats. The Zimbabwe African National Union-Ndonga (ZANU-Ndonga)
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