ZIMBABWE

Key conditions andchallenges

Table 12023

Population, million

16.7GDP, current US$ billion

33.5

GDP per capita, current US$

2012.0International poverty rate ($2.15)

a39.8
a64.5

a85.0

Lower middle-income poverty rate ($3.65)
Upper middle-income poverty rate ($6.85)
Gini index

a50.3

School enrollment, primary (% gross)

b96.0

b59.3

Total GHG emissions (mtCO2e)115.8Life expectancy at birth, years

Source: WDI, Macro Poverty Outlook, and official data.
a/ Most recent value (2019), 2017 PPPs.
b/ Most recent WDI value (2021).

GDP growth is projected to slow to 3.3
percent in 2024 after a solid post-pandemic recovery in 2022-23. While a slowdown was expected, the growth is further
affected by persistent macroeconomic instability with high inflation and exchange
rate distortions, an El Niño-relateddrought, and projected lower export
prices. The fiscal deficit is expected to increase due to the transfer of RBZ’s external liabilities to the treasury. Drought
conditions will affect agricultural output and increase food insecurity and,potentially, poverty.

Zimbabwe’s economic performance ishampered by continued macroeconomic
instability and power shortages. High inflation, exchange rate distortions, and adifficult business environment raise thecost of doing business, which in turn areleading to underinvestment, a rise in informal activity, and erosion of the fiscal revenue base. Jointly, this significantly undermines the economy’s long-term
growth prospects. The investment climate
is further hampered by inadequate electricity supply with power shortages estimated to cost Zimbabwe 6.1 percent ofGDP per annum.
Zimbabwe’s external debt has rapidly increased in recent years, driven by externalarrears and legacy debt. External debt hasrisen from US$9.5 billion in 2018 toUS$17.5 billion in 2023 (an estimated increase from 26 to 95 percent of GDP). The
increase is driven partly by debt arrears as
the GoZ stopped servicing external debt in
2000, and Zimbabwe’s external arrears accumulated to US$6.9 billion in 2023 mostlyto IFIs. The government is implementing
arrears clearance and debt resolution strategy that is critical for debt resolution andaccess to financial support. As part of this,Zimbabwe also resumed token payments
to multilateral creditors in 2021.
Poverty has been elevated, on account ofcontinued macroeconomic instability, poor
job creation in the productive sectors,

FIGURE 1 Zimbabwe / Exchange rates

weather and global health shocks, and aweak social protection system. The national extreme poverty rate has declined fromits 2020 post-pandemic peak of 49 percent
to 43 percent in 2022. Yet, poverty and vulnerability remain high, against a background of cyclical agricultural production,
climate shocks, and elevated food prices.

Recent developments
Driven by post-pandemic recovery, Zimbabwe was one of the fastest-growing
SADC economies in 2022 and 2023. RealGDP is estimated to have grown by 5.5 in2023, after a 6.5 percent growth in 2022,
on the back of an expansion in agriculture,mining, and remittances-induced services
growth. Nevertheless, macroeconomic
volatility fuelled by monetary instability
and substantial exchange rate distortions
continues to keep Zimbabwe’s economic
activity below its potential.
Inflationary pressures remain high in 2024
as local currency depreciation intensified.
Annually inflation increased for the fourthconsecutive month in February 2024, reflecting sharp depreciation of the local currency at both official and parallel foreignexchange market. Annual inflation increased from 26.5 percent in December
2023 to 47.6 percent in February 2024. The
official exchange rate has depreciated by
788 percent in 2023 with the parallel market premium estimated at 30 percent as ofFebruary 2024. Meanwhile, the Minister ofFinance announced a possible move to acurrency board, but details are lacking.

FIGURE 2 Zimbabwe / Actual and projected poverty rates
and real GDP per capita
Poverty rate (%)

Real GDP per capita (constant LCU)

100

16000

90

14000

80

12000

7060

10000

50

8000

40

6000

30

4000

20

2000

10002011

20132015

20172019

International poverty rate
Upper middle-income pov. rate

Sources: Zimstat and World Bank staff estimates.

Source: World Bank. Notes: see Table 2.

MPO

1

Apr 24

2021

2023

2025

Lower middle-income pov. rate
Real GDP pc

Fiscal pressures increased in 2023 ahead ofnational elections and the transfer of RBZ’s
external liabilities to the treasury. The government increased civil servants’ salaries
sharply, both in foreign and local currency.
The Treasury took over the servicing ofdebt of US$1.8 billion in external liabilities
from RBZ. Meanwhile, some of the revenue proposals in the 2024 budget has
been reversed, casting doubt on the credibility of the budget. Nevertheless, the implemented taxes like sugar tax have led to
an increase in prices.
The current account surplus narrowed in2023, as remittances from non-governmental organization contracted. Nevertheless,the trade deficit was slightly lower in 2023
compared to 2022. Exports increased by 9.7
percent year-on-year, driven by tobaccoand diamond. Imports increased by 6.4
percent driven by fuel and maize imports.

OutlookReal GDP growth is projected to slow further to 3.3 percent in 2024, partly reflecting

the impact of structural bottlenecks,
macroeconomic instability (high inflationand severe exchange rate volatility), an El
Niño-related drought, and lower commodity prices. El-Nino induced drought willaffect most rain fed crops and may intensify electricity supply shortages. Nevertheless, continued increase in remittances willhelp to stimulate growth in services(wholesale and retail trade), and construction. Risks are titled to the downside andinclude geopolitical tension, a weak global
environment for growth, and high inflation. Inflationary pressures will intensify
in 2024, given drought conditions and increase in domestic taxes.
The fiscal deficit will increase in 2024, driven by high interest payments on external
debt, drought mitigation related spending,wage pressures, and reversal of several
budget revenue measures. Interest payments from servicing RBZ’s external liabilities are projected to significantly increase,posing liquidity risks, amid limited accessto concessional financing. Fiscal deficit isprojected to reach 2.3 percent of GDP in
2024, before slowing to under 2.0 percent
in the medium term.

TABLE 2 Zimbabwe / Macro poverty outlook indicators

The current account surplus is expected
to shrink further, reflecting an increasein imports in the face of drought conditions and lower commodity prices. Exports are therefore expected to decline.
Remittances remain the main driver ofcurrent account surplus.
Poverty is expected to increase in 2024
due to drought and is projected to remain high in the medium term. The
elasticity of poverty reduction togrowth has proven to be very low in
Zimbabwe, undermining the outlook
for poverty reduction amid projected
deceleration of growth in 2024. Thisis further exacerbated by El-Nino induced drought. In the medium term,vulnerability to poverty is expected toincrease with changes in temperatureand rainfall patterns linked to climatechange. Key structural priorities to reduce poverty and break the dependence on weather cycles include boosting agricultural productivity, facilitating structural transformation throughinvestment climate and monetary andexchange rate reforms, and instituting
a robust social protection system.

(annual percent change unless indicated otherwise)

Real GDP growth, at constant market prices
Private consumption
Government consumption
Gross fixed capital investment
Exports, goods and services
Imports, goods and services

2021
8.5
1.5
142.1
12.8
47.0
61.5

2022
6.5
4.9
31.3
22.3
43.9
54.6

2023e
5.5
3.0
30.6
-18.0
3.0
2.0

2024f
3.3
4.0
3.6
-6.1
1.5
1.1

2025f
3.6
3.6
1.8
5.6
3.4
2.5

2026f
3.5
3.5
2.0
4.6
3.4
2.5

Real GDP growth, at constant factor prices
Agriculture
Industry
Services

8.4
17.5
6.4
7.7

6.4
6.2
5.5
7.0

5.6
11.1
2.8
6.0

3.3
-5.9
4.0
5.1

3.6
6.0
3.0
3.4

3.5
4.9
3.1
3.4

Inflation (consumer price index)

98.5

193.4

305.0

45.1

15.9

72.3

Current account balance (% of GDP)Net foreign direct investment inflow (% of GDP)

1.0
0.7

1.0
1.0

0.8
0.3

0.1
0.0

-0.2
0.0

0.7
0.0Fiscal balance (% of GDP)
Revenues (% of GDP)
Debt (% of GDP)
Primary balance (% of GDP)

-2.0
15.3
58.4
-1.9

0.1
16.4
99.6
0.2

-1.2
17.2
97.0
-0.3

-2.3
18.4
102.6
-1.4

-1.3
18.6
98.7
-0.4

-1.2
18.4
91.3
-0.5

41.4
65.8
85.6

39.6
64.2
85.0

38.2
63.1
84.5

37.7
62.7
84.3

37.1
62.0
84.0

36.4
61.2
83.7

0.4
9.9

1.2
10.4

0.7
10.8

-0.6
10.1

-0.4
9.7

-0.2
9.5

a,bInternational poverty rate ($2.15 in 2017 PPP)
a,bLower middle-income poverty rate ($3.65 in 2017 PPP)a,b
Upper middle-income poverty rate ($6.85 in 2017 PPP)
GHG emissions growth (mtCO2e)
Energy related GHG emissions (% of total)

Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD.
Notes: e = estimate, f = forecast.
a/ Calculations based on 2019-PICES. Actual data: 2019. Nowcast: 2020-2023. Forecasts are from 2024 to 2026.
b/ Projection using neutral distribution (2019) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU.

MPO2

Apr 24