On the global front, prospects for a strong global economic recovery remain dim amid obstinate inflation, rising interest rates, ongoing effects of Russia’s invasion of Ukraine, and three years of COVID-19. According to The United Nations, the global economy is projected to increase by 2.3% in 2023, up 0.4 percentage points from a January forecast. However, prediction for 2024 dropped by 0.2 percentage points to 2.5%. Projections from the IMF seem a bit optimistic with 2023 global GDP expected to increase by 2.9%. For the year 2024, the IMF forecasts a modest global economic growth of 3%. Regardless, all estimates are still below the average of 3.1% in the two decades before the COVID-19 pandemic.
Inflation has remained stubbornly high in many countries regardless of international food and energy prices tapering off substantially in the past year. While upward price pressures are expected to slowly ease, inflation in many countries will remain well above central banks’ targets. On the back of local supply disruptions, high import costs and market imperfections, domestic food inflation is still elevated in most developing countries. Furthermore, growth prospects in developing countries have deteriorated amid tightening credit conditions and rising costs of external financing.
Looking at our local economy, the country is likely going to miss it’s GDP growth rate target of 3.8% in 2023 given the country is currently facing power shortages, inflation and depreciation of the local currency. According to 2023 National Budget Statement, an inflation shock would result in the country’s economy increasing by only 1.1%. Inflation has generally been on an upward trend since the beginning of the year. Blended month-on-month inflation jumped from 0.7% in January 2023 to 74.5% in June, suggesting an increasing cost of living. During the month of June, the parallel market rate increased by 111% and YTD it has inched up by 700%. The rapid devaluation caused net buying on the market as both traditional and non-traditional investors looked to hedge ZWL, this has since stabilised in the latter part of June.