FINANCIAL services firm, FBC Securities, says the 2025 Mid-Year Budget and Economic Review points to a cautiously optimistic recovery, despite tight fiscal and monetary conditions.
Last week, Finance, Economic Development and Investment Promotion minister Mthuli Ncube released the review at a time when the economy is experiencing increased company closures and an expanding informal sector.
Despite structural macroeconomic challenges, Ncube still stuck to the 6% GDP growth this year, but notably revised downwards the GDP growth of last year to 1,7% from 2%.
With the economy projected to decline by 1 percentage point next year, this gives credence to a mixed economic outlook.
The economy remains challenging, owing to the steady growth of the informal sector, declining utility service delivery, exchange rate volatility, public debt, corruption, low investor confidence and declining liquidity, among others.
“Based on the 2025 Mid-Year Budget and Economic Review, Zimbabwe’s economic outlook reflects a cautiously optimistic recovery trajectory, albeit under tight fiscal and monetary conditions. The government projects real GDP growth of 6% in 2025, largely driven by a strong rebound in agriculture (+21,5%), continued expansion in mining (+5,3%) and a modest growth in manufacturing and services,” FBC Securities said in its post-2025 Mid-Year Budget and Economic Review analysis.
“The implementation of contractionary fiscal and monetary measures, aimed at curbing inflation and stabilising the local currency, has, however, created tight liquidity conditions in both the banking and real sectors. These liquidity challenges may constrain private sector activity, particularly in trade, construction and small enterprises, slowing down the pace of domestic demand recovery.”
The firm added that despite this, the external sector provided some resilience, with foreign currency receipts up 24% in early 2025, supported by higher export earnings and private loan inflows, while diaspora remittances remain steady.
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“The fiscal position shows signs of prudence, recording a mid-year surplus of ZiG3,3 billion, but high public debt (US$21,5 billion) and limited fiscal space continue to pose medium-term risks,” FBC Securities said.
“Overall, the economy is expected to grow on the back of export-led recovery, agriculture rebound and infrastructure spending, although growth momentum will remain vulnerable to liquidity constraints, external shocks and slow domestic demand.
“With tight liquidity limiting speculative demand for foreign currency and dampening excess money supply growth, monthly inflation is expected to remain subdued in the near term, though the economy remains sensitive to agricultural output, fuel prices and administered costs.”
The liquidity constraints stem from hawkish monetary and fiscal policies meant to buttress the value of the Zimbabwe Gold currency.
In that regard, the brokerage firm predicts that the exchange rate is likely to remain relatively stable, but illiquid. Limited domestic liquidity reduces pressure on the parallel market, while foreign currency receipts driven by exports, diaspora remittances and private loan inflows have supported the official market.
“The outlook, however, is not without risks. Persistent supply constraints, high import dependency and any fiscal slippage could trigger renewed currency pressures and pass-through inflation,” FBC Securities said.
“Overall, if the current contractionary stance is maintained, the country could experience short-term exchange rate stability and moderated inflation, albeit, at the cost of constrained domestic demand and slower private sector activity.”
The securities firm said that while the informal sector was a vital shock absorber in the current environment of tight liquidity and contractionary policies, it posed structural challenges to sustainable economic growth, formalisation of revenue and long-term industrialisation.
The informal sector has officially grown 16,1 percentage points to 76,1%, according to the Zimbabwe National Statistics Agency.
