October 7, 2019 / 3:31 PM / a month ago

UPDATE 1-Zimbabwe economy seen contracting up to 6% in 2019 - treasury document

(Adds details, background)

HARARE, Oct 7 (Reuters) - Zimbabwe’s economy is projected to contract by up to 6% this year due to a drought that hit farming output and electricity generation but is expected to rebound in 2020 on better agriculture prospects, a treasury document showed on Monday.

Hopes that Zimbabwe’s economy would quickly rebound under President Emmerson Mnangagwa, who took over after the late Robert Mugabe was deposed in a coup in November 2017, have faded fast as citizens grapple with soaring inflation which has eroded earnings and savings.

The national treasury said in a pre-budget planning document that Zimbabwe’s economic problems were being compounded by shortages of foreign currency, fuel and electricity.

“The economy is, therefore, projected to underperform by as much as -3% to -6% in 2019,” the document said, adding that the economy was expected to grow 4.6% next year.

Zimbabwe’s economy is grappling with its worst crisis in a decade, with triple-digit inflation, rolling power cuts and shortages of U.S. dollars, medicines and fuel which have revived memories of the 2008 hyperinflation under Mugabe.

The treasury said the month-on-month inflation rate was projected to fall to around 10% by December this year before easing to 2.3% at the end of 2020.

The government had kept spending in check, the treasury said, and is expecting a budget deficit of up to 4% of GDP this year. (Reporting by MacDonald Dzirutwe, Editing by Chris Reese and Ed Osmond)

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