Election will affect economic growth – BMI

Johannesburg - Leading international business think-tank organization, Business Monitor International (BMI), has forecast a drop in Zimbabwes Gross Domestic Product next year if elections are held in 2011.

In a report released this week titled Zimbabwe Business Forecast Report Q1 2011, said elections, which analysts warned the atmosphere would not be conducive to hold, would scare away investors.

Little has happened since our last quarterly update to make us consider altering our view on the Zimbabwean economy. Indeed, the political climate remains unstable and has, therefore, continued to preclude much needed foreign investment entering the economy. This being the case, our real GDP growth forecast remains unchanged at 5.4 percent in 2010. Furthermore, we believe that growth will slow to 4.9 percent in 2011 as we have factored the negative impact elections could have on investor confidence, BMI said in a statement to The Zimbabwean from United Kingdom.

Principals in the inclusive government consisting of ZANU (PF) and the MDC formations have hinted elections will be held next year.

Analysts have warned the country was not ready for a new poll owing to violence that characterized the constitutional outreach exercise. The countrys electoral body has also said it would be ready for a new poll. The mention of an election brings back memories of past elections, the most recent being the bloody 2008 presidential election that retained President Robert Mugabe in power.

The runup to the presidential runoff election was characterized by violence that forced now-Prime Minister, Morgan Tsvangirai out of the race. The uniformed forces, ZANU (PF) youth and so-called war veterans were the chief perpetrators of violence. Meanwhile, BMI warned Zimbabwes indigenization laws would also stifle economic growth.

Zimbabwe is pressing on with plans to acquire a significant stake in foreign-owned companies in a move it argues would empower previously-disadvantaged blacks.

As we discuss in the political outlook in this report, the biggest single deterrent to foreign investors is a set of indigenisation regulations that limit the amount of equity a ‘non-Zimbabwean’ may own in a company. Sections of the coalition government are aware of the effect that these regulations are having on investment into the economy and moved to amend the laws in a bid to assuage investors’ concerns. However, the amendments have done little more than to add further uncertainty to the business environment as it remains unclear how the legislation will ultimately be implemented. The lack of investment resulting from this uncertainty is affecting all facets of the economy, not least the country’s external accounts, BMI said.

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