Zimbabwe has rebased its gross domestic production, including the informal sector in its calculations for the first time.
By Alisa Strobel, senior economist: sub-Saharan Africa at IHS Markit
Zimbabwe’s nominal size of the economy has increased by around 40% after the Zimbabwe National Statistics Agency rebased its data to also include the informal sector in its calculation.
Including informal activities in national accounts provides a more comprehensive assessment of Zimbabwe’s wealth. With the new methodology, the manufacturing sector takes over the agricultural sector in size and contribution to GDP.
Zimbabwe’s new appointed Finance Minister reaffirmed the country’s commitment for reform change in working closely with the international community, announcing new fiscal policy amendments such taxing electronical payments. However, the announcement of the 2% tax hike had an immediate price increase effect through speculation, as suppliers and manufacturers pushed their price levels.
The latest move in changing the methodology and rebasing its gross domestic products certainly led to an increase of the size of the nominal economy; but, it does not change our narrative that Zimbabwe still continues to face large structural imbalances.
Furthermore, while the manufacturing sector has now gained more prominence in adding output to total productivity, Zimbabwe requires a domestic demand boost following the country’s severe difficulties over the last couple of years. Zimbabwe’s liquidity crisis has been most evident in the service sector.
Macroeconomic fundamentals are expected to show a mixed performance. Agriculture remains the key driver of growth during the second half of 2018 into 2019. However, we also see downside pressure from higher cost-inflation that will dampen growth in manufacturing.
Additionally, we also see volatility in Zimbabwe’s export performance amid tightening US monetary policy and the prospect of other central banks increasing their policy rates, impacting specifically the gold market. Nevertheless, the latest reform progress in opening the economy to foreign investors implies an upward revision to the economy’s medium-term growth performance.
Overall, IHS Markit welcomes the government’s expressed efforts to address finances in the civil service and address and re-schedule domestic and external public debt obligations which are consistent with agreements with lenders and creditors.