Stanbic predicts Zim economic recovery

Stanbic predicts Zim economic recovery

SHREWD policy decisions at Zimbabwe's Reserve Bank credited for economic improvement

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• Makamba nabbed in corruption blitz

• Chiyangwa arrested

By Agencies

ZIMBABWE'S battered economy has improved markedly this year, with a sharp decline in inflation, higher agricultural output and a slower rate of contraction, according to a survey by a leading bank.

A review by South Africa's Stanbic Bank last week said a turnaround was on the cards for 2006, after next year's elections.

"Gross domestic product is expected to decline by 8.5 percent in 2004, slower than 2003's decline of 13.2 percent," the study said.

Steps by the central bank to control skyhigh inflation, including a foreign exchange auction and lower lending rates for "projects deemed to be economically productive", had paid dividends.

"The impact of these measures was a rapid decline in inflation from just over 600 percent [at the end of 2003] to just under 450 percent in May 2004," it said.

"The central bank has set an inflation target of less than 200 percent for the end of the year and the target will probably be attained through tighter lending for non-qualifying activities and improved access to farming inputs."

Zimbabwe has in recent years been in the throes of political, economic and social instability.

Inflation has been on an upward trend since 2000 and there have been severe food shortages.

The survey said the agricultural sector had suffered "sharp declines due to drought and the land distribution programme".

"It would seem that a return to positive growth, off a lower base, is likely in 2005," it said. "Food supply has improved as smallholder farmers raised output after better rainfall and improved access to farming outputs."

The review said the value of the local currency had become realistic at "an unofficial peg of Z$5 300 to $5 350 to the US dollar".

But to stimulate the economy, it warned, the central bank "will have to allow the Zimbabwean dollar to depreciate further".
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