Zimbabwe flag Zimbabwe: Economic and Political Overview

The economic context of Zimbabwe

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

After two consecutive years of recession brought on by the passage of Cyclone Idai and a harsh drought faced in 2019, followed by the emergence of the COVID-19 pandemic in 2020, activity in Zimbabwe rebounded in 2021, supported by an exceptional agricultural season and a boost in mining activity. Growth reached an estimated 5.1% GDP in 2021, and it is expected to grow 3.1% in 2022 and 3% in 2023, mainly supported by the recovery of the agricultural sector and heightened private consumption as the COVID-19 vaccination campaign progresses.

In 2021, inflation fell from 557.2 % to 92.5%, and it is expected to continue that downward trend in 2022 and 2023, when inflation rates should reach 30.7% and 20.2%, respectively. The current account balance recorded a surplus of 4.9% of GDP in 2021, driven mainly by expatriate remittances, which maintain a positive balance on the transfer account. However, the surplus is expected to narrow to 3.8% in 2022 and 2.2% 2023, mainly due to an increase in imports of goods and services in response to the recovery in domestic demand. Despite Zimbabwe's current account surplus, the country's external position is fragile due to low capital inflows. Zimbabwe's debt remains at an unsustainable level due to the accumulation of external arrears and the expansion of domestic debt. According to the IMF, gross government debt represented 54% of GDP in 2021, but it should increase to 60.3% in 2022 and 62% in 2023. As early as 2018, the authorities had implemented a Transitional Stabilisation Program 2018–20 to restore macroeconomic and monetary balances. Fiscal consolidation measures should contain spending growth and stop the monetisation of the budget deficit. According to the African Development Bank, the country would need 3.4 billion EUR / year for ten years to rebuild its infrastructure, while the arrears held by international organisations limit the country's ability to resort to international aid. One of the country's main challenges is to re-establish a sustainable and credible economic policy in order to reconstruct the country and to offset its high public debt. The banking system is also in need of strengthening. Even though the government implement a series of measures to mitigate the social and economic impact of the pandemic, the COVID-19 crisis put pressure on the country's strained public resources, so recovery has been slow.

The country's social situation is worrying. According to some estimates, the unemployment rate is close to 80%, while other sources state that the actual rate is closer to 15%. Unemployment rate estimates stood at 5.3% in 2020 according to World Bank data (estimate modelled by the ILO). However, that rate doesn't reflect the income losses from reduced working hours, unpaid leave, and the decrease of opportunities for formal and informal sector activities which was exacerbated by the pandemic, and drove thousands of the poorest people in the country into unemployment, leaving millions Zimbabweans on the brink of starvation. Additionally, the informal economy is widespread and only 5% of workers have formal jobs. Furthermore, epidemics are worsening, mainly HIV / AIDS and cholera, and life expectancy has been steadily declining in recent years, reaching 58.56 in 2017, making it the third country in the lowest life expectancy in the world. Access to education is declining and the failure of land reform has caused the exodus of many farmers. According to the World Bank, more than 70% of the population still lives below the poverty line and the extreme poverty rate rose from 29% in 2018 to nearly half of  Zimbabweans in 2020, as the pandemic delivered another economic shock to the country.

 
Main Indicators 20202021 (e)2022 (e)2023 (e)2024 (e)
GDP (billions USD) 23.18e32.8738.2837.3038.71
GDP (Constant Prices, Annual % Change) -5.2e7.23.02.82.9
GDP per Capita (USD) 1e2222
General Government Gross Debt (in % of GDP) 102.566.992.664.957.5
Inflation Rate (%) 557.2e98.5284.9204.636.1
Current Account (billions USD) 0.680.350.220.100.15
Current Account (in % of GDP) 2.91.10.60.30.4

Source: IMF – World Economic Outlook Database, October 2021

Note: (e) Estimated Data

Main Sectors of Industry

Zimbabwe has abundant natural resources including diamond, gold, coal, iron ore, nickel, copper, lithium, tin, and platinum. Diamond, gold and platinum have been the most economically significant natural resources produced in Zimbabwe. Even though the country is rich in resources, only around 10% of the land is arable. Agriculture represents 7.6% (2020) of GDP and employs 66.1% (2019) of the population (World Bank). The agricultural sector is dominated by tobacco production, which is the country’s second source of foreign currencies. Other agricultural exports include maize, cotton, wheat, coffee, sugarcane, peanuts, sheep, goats, and pigs. Zimbabwe's economy depends heavily on its mining and agriculture sectors. Despite the negative impacts of the pandemic, the agricultural sector managed to remain stable through 2020 and 2021, mainly due to favourable rainfall. The agricultural sector is expected to spearhead Zimbabwe’s recovery in 2022, but it will remain vulnerable to climate shocks.

The mining industry dominates the industrial sector. In 2013, the EU completely lifted its embargo on Zimbabwe's diamond industry. Other industrial products include steel, wood, chemicals, cement, fertiliser, clothing, footwear, foodstuffs, and beverages. Industry represents 35.8% (2020) of the GDP and employs 6.5% (2019) of the workforce. The overall slow growth of mining and manufacturing sectors reflects a difficult business environment, characterised by high inflation, tight financing conditions, and continuation of forex retention policies, which increase the costs of doing business and prevent the mining sector from capitalising on higher global prices for minerals. Industrial sector activity remained subdued in 2021, reflecting gradual stabilisation of the economy following the initial impacts of the pandemic, and weaker global demand.

Services, which represents 49.8% (2020) of the GDP, employs 27.2% (2019) of the workforce and are highly reliant on tourism, given that the country enjoys a number of tourist sites of global significance. The construction and financial sectors also play a role in the Zimbabwe economy. Although the services sector showed a rebound in 2021, the impacts of the pandemic and the country's economic volatility will continue to weigh on its prospects in the short term. Tourism levels saw a slow recover in 2021, and it should continue on a gradual recovery course in 2022. Below-average tourism means that hotels, restaurants, and transportation will remain below capacity, despite experiencing some growth.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 66.2 6.6 27.2
Value Added (in % of GDP) 5.1 12.6 37.4
Value Added (Annual % Change) 18.3 3.2 1.5

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
39,5/100
World Rank:
174
Regional Rank:
46

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

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Latest Update: November 2022

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