African Economy: Zimbabwe says economic growth to fall to 6 year low

Zimbabwe's Finance Minister Patrick Chinamasa has cut the country's growth forecast by half to 1.5 percent this year, the lowest since the economy broke a decade-old recession six years ago.

The government had initially predicted the economy to grow by 3.2 percent, but poor agriculture performance in the first half of the year forced Harare to present a sadder estimate.

Presenting the 2015 mid-term fiscal policy review statement Thursday, the minister said overall growth will be subdued despite modest growth in some sectors during the first half of the year.

"Overall performance during the first half of the year indicates some modest growth, particularly in the sectors of mining, manufacturing, tourism, construction, finances as well as public services.

"However, their contribution to the original growth projection of 3.2 percent is being weighed down by the drought induced under-performance of agriculture," Chinamasa said.

The revised growth rate is slightly higher than the 1 percent and 2.8 percent projected by the World Bank and the International Monetary Fund respectively.

Chinamasa said the slowdown in economic activity will have a bearing on the country's public finances as well as the balance of payments.

The minister said agriculture output was projected to decline by about 8.2 percent in 2015 while the transport and communication sector was projected to register a positive growth of 3 percent against 0.9 percent of 2014.

"Deceleration in overall economic growth signifies the contribution of agriculture, and the need for drought proofing the economy given adverse effects of climate changes," the minister said.

Zimbabwe's economy is agriculture based although mining also plays a significant role in the southern African country's ailing economy.

The country suffered a 40 percent decline in maize production this year and will need to import 700,000 tonnes of the staple to avert shortages.

"Already, the importation programme has begun with about 16,670 tons having been imported by Government. The imported maize will go a long way in supporting vulnerable households," the minister said.

A 9 percent decline in tobacco production, the country's prime export earner, also weighed down the agriculture sector.

The minister said mining was poised for stronger performance to the end of the year, with growth projected above 3.5 percent from the initial projection of 3.1 percent.

There was an upward trend in mineral output during the first half of the year largely on the back of increases in gold, nickel, platinum and palladium production, the minister said.

He said the recovery in the gold sector saw output over January-June 2015 rising to 8.8 tonnes, a marked 29.3 percent improvement from the 6.8 tonnes produced in the similar period of 2014.

He said gold output for 2015 was projected at 17.5 tonnes, an upward revision from 16 tons initially projected.

Nickel output was expected at 17,000 tonnes, up from the initial projection of 16,760 tons largely benefiting from production ramp-up at Bindura Nickel Corporation, the minister said.

Platinum continued to be weighed down by the closure of Bimha mine at Zimplats and platinum output during the first half of the year declined to 5.9 tonnes compared to 6.4 tonnes recorded during the same period in 2014.

Projected chrome output for the first half of 2015 was revised downwards to 96,049 tonnes from the initial 500,000 tonnes due to low global market prices for the mineral, Chinamasa said.

Diamond output for the entire 2015 was projected at 3.5 million carats, down from the initial projection of 6.5 million carats due to declining alluvial diamond deposits at Marange.

He said tourism was projected to grow by 5.1 percent buoyed by aggressive destination marketing efforts.

"In this regard, tourist arrivals, though marginally down during the first quarter, are projected to reach 2 million tourists by year end, from 1.8 million in 2014, implying a 6 percent growth."

Meanwhile, the minister announced a raft of tax relief measures to boost the mining sector.

He removed a 15 percent export tax on chrome ore and export tax on un-beneficiated diamonds with effect from January 2015.

He also further reduced royalty rate on small scale gold producers from 3 percent to 1 percent with effect from Sept. 1 this year to boost output and curb leakages.

In line with the revised growth projections, the minister also revised downwards estimated revenue for the year to 3.6 billion dollars from the initial 3.99 billion dollars.