OWN CORRESPONDENT, Harare | Monday 4.30pm.
THE Zimbabwean economy is heading into a gruelling 18 months with both inflation and unemployment set to climb and the standard of living set to fall, a report by London-based Standard Chartered Bank said.
The gloomy report by Zimbabwe’s largest bank cites a series of negative economic factors that have dragged the economy into recession since the beginning of the year, compounded by fierce external pressure, which are is set to continue.
Business confidence is at its worst in 18 years, accompanied by the lowest levels in trading for over three years on the Zimbabwe Stock Exchange, now almost deserted by foreign investors. Fixed investment is running at its lowest levels in a decade. In the context of rising unemployment, organised labour is in an increasingly militant mood and employers can expect pressure for increased wages, further deterring new investment, the bank says. Added to this, prospects for a return to price and exchange rate stability and lower interest rates have waned with the weak performance of exports and continued pressure on the currency.
The bulletin says earnings from tobacco, Zimbabwe’s biggest single export commodity, fell 25% this year – on top of a 20% slide in 1997 – and there is little prospect of an increase.
The damning report is expected to add new weight to anxiety that the worsening economy will add to the increasingly volatile political atmosphere in which President Robert Mugabe’s government is struggling to maintain its grip on power.