The World Bank says Zimbabwe will need to accelerate its current 4.6 percent growth rate to 8-9 percent annually to achieve Vision 2030 goal of attaining upper middle income status.
This came out at the launch of the Country Economic Memorandum (CEM) the World Bank which takes a long-term view of economic developments in the country and recommend policy options to support inclusive economic growth and poverty reduction.
The last CEM for Zimbabwe was done in 1985.
Last month, Finance and Economic Development Minister, Prof Mthuli Ncube conceded that the economy will grow by less than the 4.6 percent this year due to factors including high inflation and government spending cuts.
The 4.6 percent estimate was given in July during a budget review after being revised lower from an earlier forecast for 5.5 percent growth.
“First, achieving the Vision 2030 goal will require dramatic increase in economic growth, particularly of productivity growth. Our simulations show that productivity in Zimbabwe will need to grow by 8-9% per year, much faster than the current growth rates,” said Marjorie Mpundu, World Bank Country Manager.
The Bank added that lessons from other countries have shown that transition to an upper middle- income economy took place in three tracks—macroeconomic stability, good institutions, and structural transformation.
Of these three, macroeconomic stability was a necessary condition for the success of the institution building and restructuring of the economy.
“Second, we identified several constraints to productivity growth. These include: limited financing for private investment and public infrastructure; high informality; high cost of production; and weak learning from international trade,” said Mpundu.
The root cause of these constraints is partly attributable to macroeconomic challenges and inefficient allocation of resources.
The World Bank also found that price and exchange rate volatility and distortions and unsustainable debt levels have limited investment opportunities and reduced the productivity of exporters.
Furthermore, the Bank suggested that inefficient allocation of resources across firms and sectors has hindered growth of formal firms, delayed structural transformation, and encouraged informality.
Most local firms are still to recover from the effects of the COVID-19 pandemic which was worsened by failure by government to avail a bail-out package for struggling companies.