Growing bank deposits set to boost economy
Friday, 13 January 2012 00:00
Golden Sibanda Senior Business Reporter
THE banking sector could contribute 9,3 percent to the Gross Domestic Product this year as growing deposits allow greater financial mediation by financial institutions.
According to FBC Securities, the banking sector had weathered economic drawbacks from the decade of instability and was now poised to play a major role in economic growth.
"In light of these developments, the banking sector has made a dramatic turnaround since then," said the FBC, "with the money spinning sector expected to contribute 9,3 percent to Zimbabwe's GDP this year."
FBC Securities said an efficient and healthy financial system was a vital component for faster economic development.
Other major contributors to GDP are agriculture, with an estimated 16 percent, mining at about 15 percent and manufacturing, which reportedly contributes just over 10 percent to national output.
"Judging from a casual relationship between the financial sector development and economic recovery, the banking sector stands a huge chance to remain on the mend," the securities firm said.
A new lease of life was breathed into the financial sector in early 2009, following the adoption of the multi-currency system, which helped to restore confidence in the sector, reigniting the culture of saving.
Finance Minister Tendai Biti has projected the economy to expand by 9,4 percent this year from 9,3 percent last year, 8,1 percent in 2010 and the 4,5 percent in 2009.
In that regard, the understated GDP - the value of goods and services produced by a country in a year - is projected to close the current year at US$11,9 billion from US$10 billion in 2011.
Economic analyst Mr Witness Chinyama said the banking sector contribution had all along been underestimated, although the sector plays a significant role in economic growth and development.
Mr Chinyama conceded that the sector was poised for a major contribution to GDP this year as deposits increase.
But it said continuing liquidity problems would constrain its full contribution potential.
"Depositor base is growing and is estimated to have reached US$3,5 billion at the end of last year," said Mr Chinyama. "It is expected deposits will reach US$4,5 billion by the end of this year. There are challenges currently for banks to offer long-term loans. Although deposits are rising, lending remains short term."
Deposits in the banking sector grew exponentially from about US$200 million in February 2009 to US$3,5 billion by the end of last year and were projected at US$4,5 billion by December.
Prior to the introduction of the multi-currency system, the culture of savings had been eroded due to hyperinflation, high levels of unemployment and widespread cash shortages.
During this period, most traditional banking products disappeared from the market on the back of the economic meltdown, inconsistent macro-economic policies and high lending rates.
But with the economy maintaining positive growth over the last three years, FBC Securities said the soundness of the sector would persist since its profitability is correlated to economic growth.
While only a few banks are now offering loans with tenure of up six months, the majority are still giving between 30- and 180-day loans, which limits the impact of the funds on the economy.
Labels: BANKING, GDP ZIMBABWE
Read more...
Biti's growth figures challenged
By: TZG-Bloomberg
Posted: Wednesday, August 18, 2010 4:15 am
AN international asset management company executive has challenged Finance Minister Tendai Biti and the International Monetary Fund's growth projection figures for Zimbabwe saying they are severely undervalued.
Imara Asset Management Zimbabwe Chief Executive Officer John Legat said Zimbabwe’s economy may be double the size estimated by the IMF and Minister Biti. IMF estimates Zimbabwe's stock market’s value to be $5 billion. Mr Biti projected the country’s economic growth at US$5,1 billion from US$3,5 billion.
Mr Legat says these projections make Zimbabwe's stock market look “cheap” when it is not.
Zimbabwe's economy may be as big as $10 billion, compared with the IMF estimate of about $5 billion, Mr Legat said in an e-mailed statement to Bloomberg from the capital Harare.
“We find it hard to understand why both the IMF and government are being as cautious as they are,” Legat said.
“Their views give a sobering view of the country, rather than an upbeat and exciting outlook for a country barely in its second year of reform.”
Zimbabwe is rebuilding its economy after experiencing a decade of recession that followed a drought and sanctions imposed by the Britain, the United States and their Western allies.
Imara’s estimate of the Zimbabwean economy’s size is based on a comparison of spending power in neighboring Zambia, Legat said.
While Zambia’s two biggest breweries reported sales of $230 million last year, revenue at Delta Corp., Zimbabwe’s biggest beer maker, totaled $324 million, he said.
This year, Econet Wireless, a Zimbabwean mobile-phone operator, expects revenue of $500 million, while Zambians are expected to spend $280 million with Zain Zambia, that country’s biggest mobile-phone company, Legat said.
Bigger Economy
Some measures suggest that Zimbabwe’s agriculture, tourism and manufacturing industries are also bigger than in Zambia, which has a $14 billion economy, he said.
“According to the IMF and the government, Zimbabwe’s gross national product per capita is $450, which compares with Zambia at $1,200 per head,” Legat said. “Spending patterns in both countries suggest the opposite.”
Imara estimates that Zimbabwe’s market capitalization may double as investors take advantage of the opportunities offered by the domestic stock market.
Imara Asset Management is a unit of Gaborone, Botswana- based Imara Holdings Ltd.
Labels: GDP ZIMBABWE, IMF, JOHN LEGAT, TENDAI BITI
Read more...
Biti forecasts 7 percent growth
by Business reporter
25/05/2010 00:00:00
FINANCE Minister Tendai Biti has revised upwards the country’s 2010 economic growth forecast to about 7 percent citing improved foreign investment inflows and increased donor assistance.
Last month Biti announced that the government was likely to revise downwards economic growth prejections from 7.7 percent to 4.8 percent blaming political uncertainty, slower growth and lower than expected donor support.
The minister said, then, that the country had only received about US$2.9 million in donor support this year out of the expected US$810 million.
But speaking at the African Development Bank annual assembly in Ivory Coast on Tuesday, Biti said the initial forecast of 7 percent could be achieved citing foreign investments of up to US$1 billion and an improvement in donor assistance.
"Our growth forecast for this year is 7 percent. We had revised it downwards to 4.8 percent because of lack of capital but I'm very optimistic we will have stronger growth in the second half of the year," Biti said in an interview with reuters adding that diamond sales would also help boost growth.
He however warned that the country faces huge challenges because of its “crippling” public debt of US$6.2 billion.
About US$5.3 billion of the debt comprises external obligations while domestic liabilities amount to US$513 million.
Analysts say the country does not have the capacity of repay its external debt with at least US$3.6 billion of the amount owed being arrears.
The government also remains divided on how to deal with the debt over-hang with sections of the coalition cabinet fiercely opposed to suggestions by Biti that Zimbabwe joins Heavily Indebted Poor Countries Initiative (HIPCI).
Biti also said there was little chance of the country getting its own currency back while the economy was saddled with an estimated $1.9 billion current account deficit.
The virtually worthless Zimbabwe dollar was abandoned in January 2009 in a budget presented by then acting finance minister Patrick Chinamasa.
And the use of foreign currencies such as the US dollar, the South African rand and the Bostwana pula complemented by raft of liberalization measures helped stem the decline of the last decade and put the economy on the path to recovery.
The finance minister also expressed concern over continued assessments of Zimbabwe as a high risk destination.
"What I'm really worried about is the lack of capital, foreign investment of bilateral credit lines," he said.
"The reason is largely because of the perception of high risk. In our macroeconomic foundations, we are doing better than a huge chunk of African countries, but we've got baggage -- a hangover from our years of conflict."
Labels: GDP ZIMBABWE, TENDAI BITI
Read more...
