Highlights:

Zimbabwe’s economy has seen a strong rebound since the COVID-19 pandemic. While fiscal deficits are low, initial expansionary monetary policy had put pressure on inflation and the exchange rate. A recent policy tightening has improved macroeconomic stability.

Economic activity has accelerated in Zimbabwe, despite global challenges. Zimbabwe was one of the fastest growing economies in the Southern African Development Community (SADC) in 2021, 2022 and, so far, also in 2023. The economy grew by 6.5 percent in 2022, down from 8.5 percent in 2021, but still higher than in many SADC economies. In 2023, economic growth is estimated at 4.5 percent. These growth dynamics were driven by continued expansion in agricultural output due to abundant rains and resilience-building.

The easing of COVID-19-related restrictions further supported economic activity, particularly in the tourism sector. Meanwhile, elevated commodity prices in 2022 and 2023 supported a resurgence in mining sector output. Yet, shocks from the war in Ukraine, supply chain disruptions, economic volatility, and power shortages have kept Zimbabwe’s economic activity below its potential for both 2022 and 2023. The economic rebound since the pandemic has helped to bring down the levels of poverty and food insecurity.

On the back of the economic recovery and record maize harvests in the 2020/21 agricultural season, the extreme poverty rate fell by 6 percentage points to 43 percent in 2021 and then to 42 percent in 2022. The food insecurity rates also dropped from their highs of 2020 and early 2021. Nevertheless, poverty, vulnerability, and food insecurity rates remain high.

Increased global turmoil and supply chain disruptions contributed to rising energy and food prices, and contributed to high inflation. Supply chain disruptions during the COVID-19 pandemic, together with the war in Ukraine, put considerable pressure on Zimbabwe’s inflation. Driven by the impacts on war in Ukraine, in 2021, energy prices rose 80 percent, while food prices went up over 30 percent. Similarly in 2022, energy prices went up 60 percent, while food prices increased another 18 percent.

Zimbabwe remains in debt distress and while borrowing is limited, public debt has continued to increase that is driven by external arrears and legacy debt.