eBusiness Weekly
Tawanda Musarurwa
HARARE – Zimbabwe’s economy has significant upside, which can start to be realized this year on the back of a release of “pent-up aggregate demand”, analysts Akribos Research has said.
Aggregate demand is typically defined as the overall demand for all goods and services in an entire economy, and is commonly said to equal the gross domestic product (GDP) of an economy.
To the extent of the latter, economists maintain that boosting aggregate demand also boosts the size of the economy in terms of measured GDP. The analysts see consumption in the country rising, and they expect attendant macro-economic benefits.
“Total aggregate demand in Zimbabwe, in our view, is set to slightly increase on the back of a release in the pent-up demand obtaining in the economy. Consumption fell from 80, 59 percent of total GDP in 2016 to expected 76, 42 percent in 2017 due to declining disposable incomes and rising unemployment rates. The decline in consumption was also a result of increased caution by consumers, household and business, in the face of heighted uncertainty,” said Akribos in its Zimbabwe 2018 PlayBook.
They argue that the positive 2018 National Budget announced by Finance Minister Patrick Chinamasa last December.
“The 2018 budget will likely pacify most consumers’ fears and compel them to take their foot off the risk pedal. Total consumption, which is made up of household and business expenditure (including NGOs expenditure) on goods and services was circa $500 million in 2017 and 2018 may witness a slight increase on this number. Our view is that the 2017 level had a constraint which will not be available in 2018 and this will lead to increased consumer spending.”
In the 2018 National Budget Minister Chinamasa projected a 4, 5 percent GDP growth for the Zimbabwean economy this year.
Insofar as GDP and aggregate demand have the same basic calculation, it is only expected that they should rise concurrently.
The analysts explain their perspective:
“To appreciate the expected expenditure by Zimbabwean consumers on goods and services, we isolated the NGOs expenditure to arrive at $14, 35 billion for 2018, 7, 45 percent higher than the 2017 estimate of $13, 35 billion. This suggests private consumption is expected to increase in 2017/2018 period with average expenditure per capita increasing 5, 89 percent to $863, 00 as we expect GDP per capita to increase in line with economic growth. These trends in consumer expenditure will likely see Zimbabweans shift their spending to discretionary goods and services which include insurance products,” said Akribos.
“Our expectation is that the spending spread throughout 2018 and skewed towards the second half of the year as an increase in disposable income lags GDP growth and policy clarity will be more established. The second half of 2018 will likely see the return of a more adventurous consumer than the Zim economy has witnessed since 2013. There is huge pent-up demand which we believe will become real demand in the next few years beginning in 2018.”
