Country Report Zimbabwe September 2010

Highlights

Outlook for 2010-11

  • Both the president, Robert Mugabe, and the prime minister, Morgan Tsvangirai, say that they want fresh elections in 2011 to break the political deadlock, but this timetable is likely to prove unattainable.
  • Mr Tsvangirai will come under increasing pressure from sections of his Movement for Democratic Change (MDC), which believe that the prime minister has lost touch with the electorate.
  • Some EU states appear to believe that targeted sanctions should be moderated so as to reward the government of national unity (GNU), but others-and the US-will continue to take a harder stance.
  • The GNU will have to rely on aid grants to finance much of the difference between domestic revenue and expenditure.
  • Growth in 2010-11 is likely to be constrained by ongoing power shortages and suboptimal flows of foreign capital and investment. Expansion will therefore remain well below potential, at an estimated 2.9% in 2010 and 4.3% in 2011.
  • Although inflationary pressures have moderated, upward pressure on prices is likely to persist for the remainder of 2010 and into 2011. However, average rates will remain in single digits-low by historical standards.
  • With growth in export earnings outstripping expansion of imports, the current-account deficit as a percentage of GDP is set to shrink sharply, to some 37% in 2010 and 22.5% in 2011.

Monthly review

  • South Africa's latest attempts to resolve tensions within the GNU have proved unproductive, prompting the president, Jacob Zuma, to set a 30-day deadline for the resolution of outstanding issues.
  • Mr Tsvangirai and his MDC-M counterpart, Arthur Mutambara, are coming under increasing pressure from within their own parties over their leadership styles.
  • The formal secession of the "new" Zimbabwe African Political Union from the Zimbabwe African National Union-Patriotic Front (ZANU-PF) will add to the pressures on the MDC-M.
  • Civil servants are threatening strike action in pursuit of their wage demands, and private-sector unions are likely to follow suit.
  • The initial sale of diamonds from the controversial Marange fields has proved disappointing, with earnings at the lower end of previous estimates.
  • Tobacco production and overall earnings are expected to be double the 2009 totals, although farmers are operating with relatively narrow profit margins.
© 2010 The Economist lntelligence Unit Ltd. All rights reserved
Whilst every effort has been taken to verify the accuracy of this information, The Economist lntelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this information
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