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This article participates on the following special index pages:
Zimbabwe's Elections 2013 - Index of Articles
Political
risks to slow down economy
NewsDay
July 22, 2013
http://www.newsday.co.zw/2013/07/22/political-risks-to-slow-down-economy/
Zimbabwe’s
economy is expected to slow down during the second half of the year
due to political uncertainty and macro-economic risks confronting
the economy, a local advisory firm has projected.
In a quarterly
equity market review for the period ending June, MMC Capital said
the country’s economic growth rate may miss the target partly
triggered by political risks and lack of clarity on the indigenisation
and empowerment regulations compelling foreign-owned companies to
sell 51% stakes to locals.
“We are
a bit bearish on the Zimbabwean economy in the second half of the
year as far as growth is concerned. We expect a growth rate of at
least 3,5% to be driven by mining and agriculture,” read the
report in part.
Treasury had
projected a 5% growth rate this year.
Zimbabwe
will go for elections on July 31, marking the end of the tenure
of the current coalition government formed in 2009.
MMC said despite
this slowdown, year-end annual inflation was expected to be between
2,0% and 2,5% as local firms cash in on a weakening rand.
“Lower
inflation figures are premised on the lower crude oil and global
food prices in the face of depressed domestic demand. We expect
the low incomes growth and high unemployment rates to continue suppressing
demand and a weaker rand will result in lower prices for basic commodities
from the retailers,” MMC said.
Turning to the
fragile banking sector, the advisory firm said deposits were expected
to be below $4 billion on the back of reduced confidence. Most of
the deposits would remain short term in nature.
“The participation
of multi-lateral lending institutions is likely to be limited as
the global banking sector comes under increased regulation.
“The effect
of Basel 2 regulations on the local front is likely to result in
reduced credit supply as banks will be striving to meet the increased
capital requirements. This is likely to further drive down the prospects
of the banking sector locally leading to a depressed performance,”
the report added.
MMC said the
country’s indigenisation and empowerment regulations were
widely perceived as the elephant in the living room starving local
companies of long-term financing.
Foreign-owned
banks remained a target of the policy, with Empowerment minister
Saviour Kasukuwere accusing them not extending significant credit
to the agriculture sector as well as small to medium enterprises.
However, Finance
minister Tendai Biti and Reserve Bank governor Gideon Gono have
called for caution when approaching the delicate banking sector.
They have said that those interested in the banking sector should
apply for operating licences.
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