Zimbabwe crisis:Monthly trade deficit narrows in November after imports drop 12,9 percent

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ZIMBABWE’S trade deficit continues to narrow, following a sharp 72,7 percent rise in the value of exports recorded for the month of November last year. Latest data from ZimStat shows that the country`s trade balance also received a boost from a 12,9 percent drop in imports in the same month.mugabe3

Total exports amounted to US$408,1 million while imports for the month of November 2015 were US$449,1 million, statistics reveal.

Zimbabwe`s overall trade gap for November further narrowed to only 0,29 percent of GDP from October. This followed a 225,5 percent spike in flue-cured virginia tobacco exports from US$84,5 million in October to US$275,2 million. Nickel exports also rose from US$11,4 million in October to $12.2mln in the same period.

Generally, a trade deficit is not necessarily a bad thing as it tends to correct itself over time, and if the amount of foreign capital flowing back into a country exceeds the money flowing out through imports, then deficits are not at all bad. However, for Zimbabwe, a low-growth country, sustained trade deficits are now a cause for concern as they come on the back of low inward capital flows and slowing demand for imports – in spite of the stronger dollar – as aggregate demand in the economy remains weak.

The improvement in Zimbabwe`s trade deficit from the October figure lends weight to the theory that trade deficits tend to contract in times of recession, amid growing fears that Zimbabwe is on the cusp of entering a recession. Overall the trade deficit was at US$3,03 billion from imports of US$5,51 billion and exports of US$2,48 billion.

In the month under review, South Africa remained Zimbabwe`s biggest trading partner, with total exports to Africa`s second largest economy rising 101% from US$177,7 million in October 2015 to US$358,9 million in November.

Mozambique was the second biggest export destination for the country, accounting for 5,89 percent of Zimbabwe`s total exports, at US$24.0 million. Belgium and the United Arab Emirates came in at a distant third and fourth with the value of exports to these countries coming in at $4.15mln and 4.10mln respectively.

Tobacco was the country`s biggest foreign currency earner in November, with US$275,1 million worth of tobacco being exported. Gold, Nickel and Ferro-chrome earned the country US$55,8 million; US$12,3 million and US$8,4 million respectively.

Imports from South Africa constituted 43 percent of total imports for the month of November at US$193,1 million. The data also shows that, $84.8mln worth of goods were bought from Singapore, followed by China, which supplied goods valued at US$38,5 million. Zambia was Zimbabwe`s fourth biggest import source country, with goods worth US$26,3 million being imported in the same period.

Diesel, which was the country`s most imported product by value for most of last year, steadily declined in November to US$64,7 million after it had peaked to US$132,0 million at the close of Q3. This fall comes, as global oil prices have been hovering around the US$35/barrel mark. The Organisation for Petroleum Exporting Countries (OPEC) forecasts that world oil prices will gradually rise to us$80/barrel in 2020, and if this were to hold true, Zimbabwe`s trade gap will get some respite from the low oil prices in the short to medium term.

US$464,7 million worth of unleaded petrol was imported last November, followed by maize (excluding seed) imports amounting to US$15,6 million. Wheat imports also came in at US$5,2 million in the month under review.

Zimbabwe largely remains a consumptive economy, importing fuels and food-stuffs at the expense of capital goods. Unsurprisingly, unfinished products continue to underpin total exports as the local manufacturing industry remains hamstrung.

With a drought being forecast, Zimbabwe will need to import maize to stave off hunger, predominantly for the estimated 70 percent of its population that lives in the rural areas this year, and this will likely cause a surge in imports going forward. Despite South Africa`s rand weakening to the dollar, increasingly lower disposable incomes and shrinking government revenues will all contribute to low aggregate demand in the economy, and slower economic activity in the overall economy. Zimbabwe`s fiscal deficit will potentially keep narrowing further.FinX