Country Report Zimbabwe February 2009

Outlook for 2009-10

• Zimbabwe's president, Robert Mugabe, is expected to leave power during the forecast period, as the economic and humanitarian catastrophe that he has brought about makes his position untenable.
• Mr Mugabe is, however, unlikely to leave office without a struggle, and the actions of the next president of South Africa will be crucial, as he will be in an influential position to force a change.
• Economic policy will continue to be driven by political considerations, and the economy will continue to contract, at a forecast rate of 4.7% in 2009 and 3.7% in 2010.
• Hyperinflation will continue throughout the forecast period, although it may start to decline once a new government that will halt the printing of money to finance its activities is in place.
• Inflation will continue to undermine the value of the currency, with the dollarisation of the economy set to increase.
• The global economic slump will reduce demand for Zimbabwe's metal exports in 2009-10. However, the chronic shortage of foreign currency and a collapse in demand will lead to a fall in imports, reducing the trade deficit.

Monthly review

• Morgan Tsvangirai has announced that he and his party, the main branch of the Movement for Democratic Change (MDC-T), will enter into a power-sharing government with Mr Mugabe.
• Despite the unity government, Mr Mugabe remains president and retains control of the military, the powerful Central Intelligence Organisation (CIO), the judiciary and other key ministries.
• The US has admitted to being sceptical about the power-sharing deal. The State Department acting spokesman, Robert Wood, has said that much will depend on its implementation.
• The 2009 budget scrapped all foreign currency controls, and Zimbabweans will be allowed to conduct business in foreign currencies, alongside the Zimbabwe dollar, in an attempt to tackle stratospheric inflation.
• The Reserve Bank of Zimbabwe (the central bank) has knocked a further 12 zeros off the local currency—reducing Z$1 trillion to Z$1—and introduced seven new notes with immediate effect.
• Last year was another year of economic contraction. There were large falls in manufacturing and mineral exports, as well as in tourism and tobacco production during 2008.

This report covers the following industry codes:
SIC Code: 60;49
NAICS Code: 52;22