Zimbabwe Country Risk Report Q3 2018
Zimbabwe's upcoming general election will likely see President Em-merson Mnangagwa returned to office, albeit with a weaker majority in parliament and a possible power-sharing agreement with key op-position parties. There are a number of downside risks to our core view that could potentially destabilise Zimbabwe's political climate and derail the country's economic recovery.
Zimbabwe's economy will continue to struggle over the coming quarters as the apparent improvement in investor sentiment that followed Robert Mugabe's departure from power in late 2017 has yet to translate into a tangible improvement in economic conditions. Foreign investors will likely adopt a wait and see approach with respect to committing capital, halting recovery.
The absence of any concrete plan for Zimbabwe's currency woes from ZANU-PF's election manifesto means that the status quo will remain in place over the coming quarters in the likely event that the party holds on to power at July's elections. Hard currency shortages will continue to constrain economic activity and lead to sporadic shortages of basic goods.
A hike in civil servants salaries and weak revenues on the back of faltering economic growth will keep Zimbabwe's budget deficit elevated in 2018. Although the authorities are likely to be successful in their goal of re-engaging with international donors and conces-sional lenders, this process will take time and the government will therefore remain reliant on domestic banks to finance the bulk of the budget shortfall.
Zimbabwe's current account deficit will widen over the coming quarters owing to increasing oil prices and as pent-up import demand is met amid arising FX inflows. Foreign investment and loan inflows will only materialize gradually as foreign capital providers await proof of the government's reform process.
Learn how to effectively navigate the market research process to help guide your organization on the journey to success.Download eBook