Country Report Zimbabwe July 2008

Outlook for 2008-09

• Via oppression and intimidation of the opposition, Zimbabwe's president, Robert Mugabe, is expected to cling on to power.
• Although the opposition has gained a parliamentary majority, Mr Mugabe will simply bypass parliament and rule by decree.
• Economic policy will continue to be driven by political considerations, and the economy will continue to contract.
• Hyperinflation will continue throughout the forecast period as the government continues to print money to finance its activities. This will be compounded by high global food and fuel prices.
• The new float of the official exchange rate is likely to be short-lived, as the government will be unwilling to face the additional economic pain of it plummeting in line with the parallel rate.
• A rise in metal exports should push up export earnings in 2008-09. However, imports will remain high, owing both to high world oil prices and substantial food imports.
• As a percentage of GDP, the current-account deficit will surpass 60% by 2009 because of the ongoing contraction of the economy.

Monthly review

• An upsurge in violence ahead of the run-off vote for the presidency caused the opposition leader, Morgan Tsvangirai, to pull out of the race in an effort to end the persecution of his supporters.
• The election went ahead anyway, despite Mr Mugabe being the only candidate. Mr Mugabe was duly returned to power.
• There was much international criticism of the farce of an election, from both within and outside the African continent. However, the international community stopped short of imposing sanctions.
• The South African president, Thabo Mbeki, has launched an attempt to bring about a unity government despite the continuation of violence and intimidation of opposition supporters at the hands of the state.
• The German firm that provided paper for Zimbabwe's currency to be printed on has stopped its supply. This has presented a tough challenge to the monetary authorities.
• Hyperinflation has continued unabated, with many workers now having resorted to joining the informal sector to keep up with the cost of living.
• A UK supermarket, Tesco, has stopped purchasing produce from Zimbabwe.

Source: Country Report