HARARE: Zimbabwe expects faster economic growth of 2.7 percent in 2016 but sees potential risks from a possible slowdown in China's economy, low commodity prices and a possible drought, the finance minister said on Thursday.
The Southern African country has cut this year's growth forecast by half to 1.5 percent after a drought hit farm output while weak commodity prices reduced earnings from mineral exports and power shortages have affected industry and mines.
Finance Minister Patrick Chinamasa said Zimbabwe required a higher growth rate to recover from a decade of catastrophic economic decline between 1999-2008, when the economy contracted by 45 percent.
The economy was projected to rebound next year on the back of growth in mining, tourism and construction but downside risks remained.
"In particular, potential economic slowdown in such emerging markets as China affects demand for our exports," Chinamasa said in his 2016 budget statement.
"This, compounded by the continued decline in international mineral prices will continue to undermine the performance of the mining sector as what prevailed in 2015." Chinamasa said he planned to spend $4 billion in 2016 and would raise $3.85 billion from taxes. The $150 million deficit, which is equivalent to 1.1 percent of GDP, would be financed through domestic borrowing.
Eighty percent of the $4 billion would go towards salaries and pension for government workers, Chinamasa said.
Without any balance of payment support and starved of foreign credit, Zimbabwe is running its budget hand-to-mouth, leaving it with virtually no money for infrastructure.
The annual consumer price index would average -1.2 percent next year. Chinamasa blamed deflation on weak consumer demand and an influx of cheaper goods from South Africa, whose rand currency has depreciated against the US dollar.
President Robert Mugabe's government, whose foreign debt stands at $7.1 billion, expects to clear $1.8 billion in arrears to international financial institutions in the first half of 2016, Chinamasa said. Gold output would increase to 24 tonnes in 2016, the highest since 1999 according to ministry of mines data. Bullion production is expected to rise to 18.7 tonnes this year, up from 13.7 tonnes produced last year, said Chinamasa.
Diamond production would also nearly double to 6 million carats next year from 3.36 million in 2015. Chinamasa said platinum mines should take concrete steps towards setting up base metal refineries by the end of 2016 or risk the re-introduction of a 15 percent tax on raw platinum tax by the government the following year.
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