Zimbabwe likely to cut 2010 growth forecast

By Nelson Banya

HARARE (Reuters) – Zimbabwe is likely to cut its 2010 economic growth forecast from 7.7 percent to 4.8 percent due to political uncertainty and its failure to attract foreign donor support, Finance Minister Tendai Biti said on Thursday.

Biti said donors had so far provided only $2.9 million to finance an $810 million budget deficit.

“If this slow off-take persists then we may have to revise our growth target to about 4.8 percent. We are not doing this now, but will make a definitive statement in the mid-year budget review,” Biti told reporters.

The southern African nation’s economy grew by 5.1 percent in 2009 compared to an earlier projection of 4.7 percent, Biti said.

Zimbabwe’s power-sharing government, formed last year by bitter rivals President Robert Mugabe and Morgan Tsvangirai, now prime minister, says the country needs at least $10 billion to fix an economy that shrank by over 40 percent between 2000 and 2008.

But analysts say frequent wrangling over reforms within the coalition and doubts that Mugabe is ready to genuinely share power have resulted in donors withholding significant aid, delaying economic recovery.

“The 2010 budget counts on THE significant support of donors, amounting to $810 million, but the regrettable thing is that donor financing, which we had earmarked for capital projects has not materialised,” Biti said.

“It is our politics that explains why there’s multilateral (donor) support for Zambia and Botswana but none for Zimbabwe.”

Although the government has managed to stabilise the economy — ending ten years of decline in 2009 and taming hyperinflation which peaked at 500 billion percent in December 2008 — Zimbabwe still struggles to feed itself.
Aid agencies say over 2 million Zimbabweans will need food aid this year.

Biti said a harvest of 1.5 million tonnes of maize was expected in the 2009-2010 season, above the previous season’s 1.2 million tonnes, but there would still be a 500,000 tonne shortage which would be filled by imports.

Rising food prices threatened to drive inflation above the government’s single-digit target, he said.

“There are strong signals that inflation is on the rise, as shown by the increase of month-on-month inflation from 0.7 percent in January to 1 percent in February,” Biti said.

“One percent month on month inflation compounds to over 10 percent inflation by year-end, beyond the 5 percent which we have projected.”

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