Zimbabwe

Economic Overview

The Republic of Zimbabwe has an economy rich in resources but burdened by a history of hyperinflation, political instability, and policy uncertainty. The economy is currently undergoing a complex transition with the introduction of a new currency, the Zimbabwe Gold (ZiG), in an attempt to de-dollarize and stabilize the macroeconomic environment. The country's potential lies in its vast mineral wealth, fertile land for agriculture, and significant tourism assets. The 2025-2026 outlook is highly uncertain, depending on the success of the new currency regime, the government's ability to implement credible reforms, and its capacity to attract foreign investment.

GDP Size & Growth Trajectory

Zimbabwe's economy is relatively small and has experienced extreme volatility. After a period of modest recovery, growth is expected to slow significantly due to the challenges of drought, power shortages, and the uncertainty surrounding the currency reforms. The IMF projects real GDP growth to fall to around 3.2% in 2025.

Sector Composition

• Agriculture: This is a cornerstone of the economy, contributing around 8% to GDP but providing employment and livelihoods for the majority of the population. Tobacco is the most important cash crop and a primary source of export earnings. Maize is the main food staple, but production is highly vulnerable to drought.
• Industry: The industrial sector contributes about 20% of GDP, and is dominated by mining. Zimbabwe has the world's second-largest reserves of platinum group metals (PGMs) and chromium ore. Gold, diamonds, and lithium are also major mineral exports.
• Services: This sector accounts for the majority of GDP (over 60%), driven by telecommunications and financial services.

Inflation Trends

Hyperinflation has been the defining feature of Zimbabwe's economic history. The country has repeatedly suffered from astronomical inflation rates that have destroyed savings and destabilized the economy. The introduction of the new ZiG currency in 2024 is the latest attempt to break this cycle. While official year-on-year inflation has been reported at around 55%, these figures are often disputed, and the real inflation experienced by consumers is believed to be much higher.

Fiscal & Monetary Policy Stance

• Monetary Policy: The Reserve Bank of Zimbabwe (RBZ) is focused on implementing the new currency reform. The ZiG is backed by a composite basket of foreign currency reserves and precious metals (mainly gold). The RBZ has set a high policy rate to defend the new currency and curb inflation.
• Fiscal Policy: The government faces severe fiscal constraints, with limited access to international capital markets. It is focused on increasing domestic revenue and containing expenditure.

Debt Sustainability Indicators

Zimbabwe is in debt distress and has significant arrears to international financial institutions, which cuts off its access to concessional financing. Resolving its external debt situation is a critical prerequisite for any sustainable economic recovery.

Table 1: Key Macroeconomic Indicators (2023-2026F)

Market Size & Demand Potential

The domestic market has been severely eroded by decades of economic crisis and hyperinflation, leading to low purchasing power.

Population Size and Demographics

With a population of around 17 million, Zimbabwe has a well-educated human capital base, which is one of its key potential assets.

Urbanization and Consumer Hubs

The capital city, Harare, and the second-largest city, Bulawayo, are the main urban and economic centers.

Business Environment

The business environment in Zimbabwe is exceptionally challenging, characterized by policy inconsistency, a difficult currency situation, and governance issues.

Ease of Doing Business & Regulatory Reforms

The country ranks very low on global ease of doing business indices. Key challenges for investors include the unstable currency, difficulties in repatriating profits, and a complex regulatory environment. The Zimbabwe Investment and Development Agency (ZIDA) is the national body for investment promotion.

Political Stability & Governance

Zimbabwe has a history of contentious politics and a challenging governance environment.

Political Environment

The country is a presidential republic. The ZANU-PF party has been in power since independence in 1980. The political environment is often tense, particularly around elections, and this has contributed to policy uncertainty.

Rule of Law & Investor Protection

The rule of law is weak, and property rights have been a major point of contention, particularly concerning land. The judiciary's independence can be subject to political influence, and contract enforcement is a significant concern for investors.

Infrastructure Readiness

Years of underinvestment have led to a deterioration of the country's once-solid infrastructure.

Transport and Logistics

As a landlocked country, Zimbabwe relies on transport corridors through its neighbors, primarily South Africa and Mozambique, to access seaports. The road and rail networks are in need of significant rehabilitation.

Energy Sector

The country faces a severe and chronic electricity deficit, leading to frequent and prolonged power outages. The state-owned utility, ZESA, is unable to meet demand. The country relies on aging coal-fired power stations and hydropower from the Kariba Dam, which is vulnerable to drought. This energy crisis is a major constraint on the productive sectors of the economy.

Sector-Specific Opportunities

1. Mining (Platinum, Gold, Lithium)

This is the most significant sector for foreign investment.

• PGMs & Gold: Zimbabwe has vast reserves and remains a major global producer.
• Lithium: The country has some of the world's largest hard-rock lithium deposits, making it a critical player in the global battery supply chain. This has attracted significant new investment.

2. Agriculture (Tobacco and Horticulture)

Tobacco remains a key export crop. There is also significant potential to revive the horticultural sector, which was once a major exporter of fruits, flowers, and vegetables to Europe.

3. Tourism

Zimbabwe has world-class tourism assets, most notably the magnificent Victoria Falls, which it shares with Zambia. National parks like Hwange and Mana Pools offer incredible wildlife experiences. The sector has immense potential for recovery and growth, but this is contingent on a more stable political and economic environment.