Macroeconomic uncertainty, financial development and economic growth in Zimbabwe

Abstract

Zimbabwe has one of the most well-diversified economic structures in Sub-Saharan Africa with a relatively sophisticated financial and capital market. Yet over the last two decades and a half, the country has experienced low and variable real GDP growth rates. In 1982-89 Zimbabwe recorded a negative average real GDP per capita growth rate of -0.2 percent, which fell further to an annual average rate of -3.2 percent in 1990-95. In addition, the country faces growing macroeconomic uncertainty mainly due to high public deficits and high inflation. Inflation, which is an indicator of macroeconomic uncertainty increased from an average of 13.7 percent in 1982-89 to 26.2 percent in 1990-95, while government budget deficit averaged over 9 percent of GDP between 1980 and 1995. Thus, as in other developing countries, macroeconomic stability and liberalisation are prerequisites for economic recovery and sustainable growth in Zimbabwe.