Zimbabwe is likely to miss the targeted 9,4 percent economic growth rate this year as liquidity shortages persist and political parties invest their energies on the upcoming general elections, raising the spectre that the country would not be able to buttress economic growth, market watchers say.

Annual inflation, experts also claim, might climb to 5,8 percent by year-end from the 4,9 percent recorded in December, depending on the exchange rate between the United States dollar and the South African rand.

Reserve Bank Governor Dr Gideon Gono said last week the central bank had lost its ability to influence economic variables such as the exchange rate and interest rates ever since the introduction of the multi-currency system.

Zimbabwe, whose currency is biased towards the greenback, especially after the introduction of the multi-currency system in 2009, relies mainly on South Africa for the bulk of its imports.

The recent projections coincide with the downgrade of global economic growth forecasts by the World Bank last week.

It is now believed that global growth for 2012 will be down to 2,5 percent from the 3,1 percent predicted in June last year.

According to a research note by brokerage MMC Capital Investment Research who accurately predicted that the country’s inflation will rise more than the targeted 4,5 percent last year, economic prospects and performance in 2012 “will continue to be largely determined by political out turn”.

“As indicated earlier, we expect more political energies to be directed towards electioneering than growing the economy; we thus take a more conservative view on the 2012 growth rate than the 9,4 percent projected by the Ministry of Finance.

“With the debt issue unlikely to be resolved in 2012, we do not see an upsurge in foreign capital flows. Foreign portfolio flows have been restricted to the equities market, and by their nature, constitute ‘hot capital’ whose impact on the economy’s liquidity may not be sustained. Foreign lines of credit have remained elusive, with the few coming from regional financial institutions like Afrexim Bank, PTA Bank and DBSA (Development Bank of South Africa).

“The continued roll-over of these lines will depend to a large extent on satisfactory performance by the borrowing industry.

“Recent indications from the banking sector on the ability of industry to service credit facilities have been far from satisfactory (which dampens the prognosis on the envisaged growth in Finance).

“Meanwhile, foreign direct investment (FDI) continues to come through in the form of capital goods and thus impacting minimally on the country’s liquidity situation. Output from tobacco is expected to contribute the bulk in agriculture while platinum and gold production should drive contribution from the mining sector,” observed the research note.

After the expiry of the inclusive Government as stipulated by the Global Political Agreement, which effectively gave birth to the current political arrangement, elections are expected.

However, though the country is gradually shifting from stabilisation to growth, shortage of working capital for local industry is negatively impacting on growth prospects.

Presently, the country is laden with an external debt of over US$8 billion, which has affected the country’s credit rating and made borrowings from either bilateral or multilateral financial institutions very expensive.

Of the more than US$1 billion that was pledged by various African institutions at the formation of the inclusive Government, Government has managed to get little, if any, of the resources.

MMC Capital Investment Research contends that a sustainable debt strategy is key to sustainable economic growth.

Added the brokerage: “Zimbabwe’s economic prospects and performance in 2012 continue to be largely determined by political outturn.

“Key reforms (such as a sustainable debt strategy and an improvement in property rights’ legislation) aimed at improving the investment climate remains vital for sustainable economic growth.

“The lifespan of the Government of National Unity (GNU), whose creation is owed the current economic and political stability, is now coming to an end with elections expected either this year or in 2013.

“Ahead of these elections, we expect political parties to invest more of their energies in preparing for elections than nurturing economic growth.”

Political experts, however, opine that the resolution of the political questions will be key to provide the much needed growth momentum.

Though economists are largely cautious about the country’s growth prospects, it is believed that over the coming years the economy will grow at robust rates.

Zimbabwe National Chamber of Commerce (ZNCC) economist Mr Kipson Gundani notes that the Zimbabwean economy will likely grow at robust rates of more than 7 percent over the coming years buoyed by abundant natural resources, developed infrastructure and the multi-currency system.

“The unity government, though fragile, has proven itself capable of establishing an environment in which the economy can begin to heal itself.

“If,  and this is a big if,  economic policy continues on roughly the             same track for the years to come, we believe the Zimbabwean economy has the potential to grow by leaps and bounds.

“Looking to the experiences of other countries that have faced similar levels of economic contraction (roughly 50 percent over 10 years in the case of Zimbabwe) demonstrates that a speedy recovery is possible.

“After rapidly losing a respective 56,5 percent and 52,3 percent of real GDP in the 1990s, Rwanda and Kuwait had returned to their pre-crisis level of real GDP within six years of reaching their trough.

“Moldova, Sierra Leone and Russia all lost close to 50 percent of their GDP in the 1990s, but were also back to pre-crisis levels within nine years,” said Mr Gundani.

He added that only Iraq and Ukraine had not yet managed to return to their pre-crisis levels.

ZNCC contends that if the political situation remains on track, the country will be able to return to the 1999 level of real GDP by 2016.