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ZIMBABWE's gross domestic product (GDP) will grow at a slower pace this year than government has predicted due to a poor agricultural season, declining exports and lack of clear policies to stem a long drawn crisis, a stockbroker has predicted.

Government has revised growth targets announced in the 2016 National Budget at 2,7 percent to 1,5 percent.

This figure remains largely ambitious given the sustained economic crisis in the country, highlighted by a blazing liquidity crisis.

In a new report analysing the stock market, corporate and economic trends, researchers at the Harare-based Invictus Securities said given the negative fundamentals in the economy, GDP growth would be at 0,8 percent this year, but warned it could still turn out to be worse than that, according to a report sent to clients on June 8, 2016.

It will be the first time in eight years that GDP growth has slipped below one percent, signifying the intensity of the economic crisis that has precipitated a wave of bank runs, waning confidence and carnage on the stock market.

"According to the Ministry of Finance, 2016 GDP is forecast to grow by a revised figure of 1,5 percent from original estimate of 2,7 percent," Invictus said.

"We however expect GDP to grow by at most 0,8 percent in 2016, for the first time since dollarisation, on the back of drought-driven steep decline in agricultural production across all food crops, decline in fiscal revenue, inconsistency in economic policies, low commodity prices, liquidity and cash constraints, and low productivity. We forecast that the economy will register higher imports -- especially of food -- and a further decline in exports due to the strong dollar to drag down GDP," said Invictus.

After registering double digit growth rates between 2009 and 2010, the country has witnessed a complete reversal of this trajectory in the past three years.

The key agricultural and manufacturing sectors are in a near comatose state; banks are battling long queues; and many companies have closed while those that remain operational are tottering on the brink of collapse.

"With formal employment continuing its decline and an increase in emigration, private consumption spending will be seriously constrained," said Invictus.

"Efforts to trim government consumption spending will be militated by the need to finance the maize imports for distribution to upwards of three million people. With tax revenues coming under increased pressure, the budget deficit will be substantially higher than forecast in the 2016 budget," the report added.

It said there had been positive progress made under an International Monetary Fund-led Staff Monitored Programme, as well as efforts to clear the country's colossal debt estimated at about US$10 billion.

But there was need for more reforms to attract foreign direct investment (FDI) inflows.

"We are of the opinion that meaningful FDI inflows may materialise after institutional and structural reforms are effected and an explicit plausible economic growth model is developed to set a clear investments promotion tone," the report added.

Source: Financial Gazette

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