(Bloomberg) -- Zimbabwe‘s government expects economic growth to rebound strongly next year as the country recovers from an El Niño-induced drought that’s curbed farm output, fueled demand for imports and squeezed state finances.
Gross domestic product is expected to expand 6% in 2025, up from 2% this year, Finance Minister Mthuli Ncube said in a budget presentation on Thursday. He previously anticipated a 5.3% expansion in 2024.
“The attainment of projected economic growth will result in Zimbabwe being one of fastest-growing economies in the region next year,” Ncube told parliament, northeast of the capital, Harare.
Zimbabwe has been beset by economic problems for years, largely due to mismanagement and policy missteps. Households and businesses have to contend with lengthy power outages, sky-high borrowing costs and dilapidated infrastructure.
In April, the authorities made their sixth attempt in 15 years to introduce a local currency to replace the dollar, which is used in most transactions. They are still struggling to win public trust in the ZiG unit, which has been highly volatile and was devalued by 43% against the greenback in late September.
The southern African nation is one of several in the region to revised their 2024 growth forecasts due to the drought, the worst in four decades.
Better rainfall due to the La Nina phenomenon is anticipated this season and that bodes well for agricultural production, according to Ncube. Rain has already fallen across the country, and farm output is expected to contract 15% this year, less than the previous 21% estimate, with the wheat and dairy industries performing better than expected, he said.
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Farming and mining are the two mainstays of the economy, and are expected to expand 12.8% and 5.6% respectively in 2025. Growth in the mining sector is expected to be driven by increased output of gold and platinum group metals.
“High commodity prices are expected to persist in 2025, mainly due to the continuation of geopolitical tensions, robust demand for metals driven by clean-energy investments and increased industrial and infrastructure activity in China,” Ncube said.
The government, which announced expenditure cuts across multiple government departments earlier this month, envisions spending $7.7 billion next year and collecting $7.5 billion, Ncube said.
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All businesses including car dealers, boutiques and lodges will be required to register their operations with the Zimbabwe Revenue Authority from Jan. 1, a measure that’s aimed broadening the tax base. The tax authorities will be able to temporarily close businesses that fail to regularize their operations, Ncube said.
Tight fiscal and monetary policy will be maintained into next year in a bid to contain inflation and deter efforts by speculators to undermine confidence in the ZiG.
Monthly inflation in local currency terms is forecast to average less than 3% in 2025, Ncube said.
--With assistance from Desmond Kumbuka and Ana Monteiro.
(Updates with background, details from third paragraph.)
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