MACRO | IH Macro-Economic Update - 2024 Monetary Policy Statement Review

    The Reserve Bank of Zimbabwe delivered the highly anticipated 2024 Monetary Policy Statement (MPS) amidst a multi-currency system characterized by exchange rate and inflation volatility. Throughout 2023, the central bank maintained a tight monetary policy stance typified by high interest rates, stringent liquidity management and management of foreign exchange to foster price and exchange rate stability. Regardless, the prospects of the local currency remained under pressure under the multi-currency system due to exchange rate and inflation volatilities. Although the parallel rate premium was maintained below 30% for the greater part of 2H23, the trend reversed, with the premium widening to above 50% in December and January driven by excessive demand for foreign exchange. Monthly inflation eased from a peak of 12.1% in June 2023 to an average of 2.1% up to December 2023 because of the contractionary measures implemented by the central bank and government. However, this year has seen resurgence, with inflation peaking at 55.3% in March 2024, driven by rapid local currency depreciation. The domestic economy is estimated to have grown by 5.5% in 2023, down from 6.5% in 2022, buoyed by agriculture, mining, ICT and tourism. The ongoing El Nino induced drought is impacting the domestic economy’s growth trajectory however, with growth in 2024 forecast at 3.5%. Globally, economic growth is forecast to remain stable at 3.1% in 2024, with tight fiscal and monetary policies stunting growth in advanced economies. Global inflation is forecast to decline steadily from 6.9% in 2023 to 5.8% in 2024 due to tight monetary policies and easing commodity prices. The domestic economy continues to operate amidst increased underlying global risks and vulnerabilities because of tight global financial conditions, geopolitical tensions and extreme weather events.


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