HARARE, Nov. 17 (Xinhua) -- Zimbabwe's economy is projected to grow by 6 percent in 2021 after a cumulative contraction of 11 percent in 2019 and 2020 due to the combined effects of COVID-19, Cyclone Idai and protracted drought and weakened policy buffers, the International Monetary Fund (IMF) said Wednesday.
The IMF noted that following a severe third wave of the pandemic between June and August 2021, COVID-19 infection rates in the country have slowed down significantly, lockdown measures have been eased and the vaccination continues steadily.
"The authorities' swift response to the COVID-19 pandemic, including through containment measures and support to vulnerable households and firms, helped mitigate its adverse impact.
"Economic activity is recovering in 2021, with real GDP expected to grow by about 6 percent, reflecting a bumper agricultural output, increased mining and energy production, buoyant construction and manufacturing activity and increased infrastructure investment," the IMF said in a statement following the conclusion of its Article IV Mission to Zimbabwe.
However, the IMF warned that uncertainty and downside risks remain high and that the outlook will depend on the pandemic's evolution - compounded by the economy's vulnerabilities to climate shocks and implementation of sustainable policies.
The IMF growth forecast is lower than the 7.8 percent growth rate that has been projected by the Zimbabwean government.
The IMF conducted its Article IV consultations with Zimbabwean officials through virtual meetings.
Among its major highlights, the IMF noted that key policy areas that need attention include the need to allow greater exchange rate flexibility and tackling foreign exchange market distortions, accompanied by appropriate macroeconomic policies, creating fiscal space for critical spending, growth-enhancing structural and governance reforms and data transparency.
"Macroeconomic and structural reforms would help in durably restoring macroeconomic stability, improving competitiveness, enhancing financial sector resilience and boosting productivity, this paving way to higher and more inclusive growth and poverty reduction," said Dhaneshwar Ghura, head of the IMF Mission to Zimbabwe.
On Zimbabwe's plans to use its 961 million U.S. dollars SDR allocation to support spending in social, productive and infrastructure sectors, as well as building reserve buffers, the IMF urged caution and transparency.
"In this context, the use of the SDR allocation should not substitute for critical reforms, be spent on priority areas within a medium-term plan, and follow good governance and transparency practices," the IMF said. Enditem
