Economic Outline

Economic Indicators

Zimbabwe is a lower-middle-income country with strong human and natural capital, offering significant growth potential. With a highly educated workforce, abundant resources, and recent economic and institutional reforms, Zimbabwe could achieve rapid growth and reach upper-middle-income status by 2030, as targeted by the Government of Zimbabwe (GoZ). However, macroeconomic instability and fiscal pressures have historically hindered progress. The country’s economy is recovering after the El Niño-induced drought, with growth slowing from 5.3% to an estimated 2% in 2024. The drought reduced agricultural output by 15%, while lower electricity production and falling prices for key minerals (platinum and lithium) further impacted growth. However, strong remittances helped support domestic trade, services, and construction, boosting the current account surplus to an estimated USD 500 million (1.4% of GDP) in 2024. Growth in 2025 is projected to rise to 6%, driven by a recovery in agricultural output due to improved climate conditions and a forecasted improvement in terms of trade (IMF).

Concerning public finances, fiscal pressures worsened, largely due to the transfer of the RBZ’s quasi-fiscal operations to the Treasury. Although strong revenue collection kept the 2024 budget deficit to an estimated 1% of GDP, these pressures led to a buildup of domestic expenditure arrears, prompting the government to introduce emergency spending cuts. The ZiG WBWS exchange rate remained stable from its launch in April 2024, with month-on-month inflation averaging 2.3%, until weakening in September. Monetary tightening since then helped restore stability, with both the WBWS and parallel market rates stabilising and the gap between them narrowing. According to the World Bank, public debt remains high, unsustainable, and in distress, restricting access to international financing. With growing external arrears and legacy debts, total public debt reached USD 21.2 billion in 2023 (96.6% of GDP). In April 2024, the RBZ launched the ZiG currency, initially stabilising the exchange rate and keeping inflation in single digits through August. Tight monetary policy from October helped improve inflation dynamics, with ZiG inflation projected to fall from 736% in 2024 to 84% in 2025, and 8% over the medium term. Despite progress, Zimbabwe remains heavily dollarised, with foreign currency accounts making up 83% of broad money in December 2024. USD inflation is expected to stay in single digits in 2025, further improving the weighted USD-ZiG inflation rate. The parallel market premium has also narrowed, easing currency pressures.

Unemployment rate estimates stood at 21.8% as of Q3/2023, according to ZimStat, the country's national statistics agency. Due to low GDP growth in 2024, the poverty rate at the USD 2.15/day (PPP) international line declined only slightly to 37.7% (World Bank). The agricultural downturn from drought likely hit rural and farming households the hardest. Poverty is expected to decline in 2025 with stronger growth, though global uncertainties pose risks. Weak 2024 growth and low poverty reduction elasticity slowed progress. Despite strong human capital, job creation remains limited and informality high. The El Niño drought exposed poor households' climate vulnerability, highlighting the need for broader, targeted social protection. Lastly, the country was estimated to have a GDP per capita (PPP) of USD 5,075 in 2024, among the lowest in the world (IMF).

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