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Zimbabwe Country Risk Report Q2 2016

Zimbabwe Country Risk Report Q2 2016

Core Views

Growing signs of internal divisions in the ruling ZANU-PF adds toexisting uncertainty over the future of politics in Zimbabwe once91-year-old President Robert Mugabe retires or dies. Against thisbackdrop, a worsening economic climate will put added pressureon government stability.

The deflationary conditions that Zimbabwe has been experiencingfor the past two years will persist through 2016 due to subdued domesticdemand, a weak South African rand and weak internationalcommodity prices.

Political and policy uncertainty will continue to deter much-neededinvestment into the moribund Zimbabwean economy, while a weakharvest, depreciating South African rand and lower commodity priceswill also weigh on short-term economic activity.

We estimate the Zimbabwean economy slipped into recession in2015 driven by a crippling drought, weak demand for key mineralexports (ie gold and diamonds) and limited investment opportunities.

We expect only a minor improvement over the coming quarters,with economic conditions set to remain highly challenging owing todomestic and external headwinds.

Major Forecast Changes

No major forecasts changes.


Executive Summary
Core Views
Major Forecast Changes
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Economy Stuck In The Doldrums
Economic growth in Zimbabwe will barely creep above zero in 2016 as the effects of drought, low commodity prices and weak levels of
foreign investment keep the economy in the doldrums.
GDP By Expenditure Outlook
TABLE: 10-YEAR ECONOMIC GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: GROSS FIXED CAPITAL FORMATION FORECASTS
TABLE: NET EXPORTS FORECASTS
Monetary Policy
Deflationary Conditions To Remain In 2016
The deflationary conditions that Zimbabwe has been experiencing for the past two years will persist through 2016 due to subdued
domestic demand, a weak South African rand and weak international commodity prices.
Monetary Policy Framework
Fiscal And Debt Outlook
Little Near-Term Growth Triggers
Zimbabwe's 2016 budget will offer little economic stimulus to reignite growth given near-term spending constraints, limited domestic
revenue generating capacity and a lack of access to international capital markets. If a new round of promised Chinese investment
comes to fruition, the benefits will likely be felt in the longer term.
Structural Fiscal Position
TABLE: MAIN REVENUE & EXPENDITURE CATEGORIES
Currency Forecast
ZAR: 2016 Budget To Revive Early-Year Bullish Run
In the short term, we expect the rand’s early-year rally to be revived by a prudent 2016/17 Budget presentation, in the light of capital
expenditure cuts and a rise in taxes. However, the rally will fizzle out as bearish fundamentals prevail.
TABLE: BMI SOUTH AFRICA CURRENCY FORECAST
Chapter 2: 10-Year Forecast
The Zimbabwean Economy To 2025
Policy Risks To Constrain Long-Term GDP Growth
The performance of the Zimbabwean economy will remain inextricably linked to the policy and political climate over the coming years.
Although the trajectory of this is difficult to predict, at this juncture we believe the economy will expand, but only at a very subdued rate
as much-needed foreign investment will remain at bay owing to nationalistic policies of the ZANU-PF dominated government.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Factionalism To Continue Dominating Political Discourse
Zimbabwe's succession battle will reach fever pitch in the coming quarters ahead of the 2018 general elections, leading to elevated
levels of political instability.
Long-Term Political Outlook
Succession Question Prompts Heightened Instability
Political instability in Zimbabwe will increase in the next two years, ahead of the 2018 general election. The ruling ZANU-PF party looks
set to retain dominance although succession questions will intensify as ailing president Robert Mugabe's rule approaches its end.
Chapter 4: Operational Risk
SWOT Analysis
Operational Risk Index
Operational Risk
TABLE: OPERATIONAL RISK
Trade Procedures And Governance
TABLE: SUB-SAHARAN AFRICA – TRADE PROCEDURES AND GOVERNANCE
Vulnerability To Crime
TABLE: IMPORT AND EXPORT DOCUMENTS
TABLE: TRADE PROCEDURES BREAKDOWN
Chapter 5: BMI Global Macro Outlook
Global Macro Outlook
Downside Risks Gather Momentum
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
TABLE: MACROECONOMIC DATA & FORECASTS

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