Political instability had seen real gross domestic product (GDP) fall by an excess 40 percent, while hyperinflation ground business to a screeching halt and put millions of Zimbabweans out of employment.

The establishment of a government of national Unity (GNU) in February 2009 and the adoption of a multi-currency regime brought about economic recovery and price stability, and strong recovery will continue this year, with the economy forecasted to grow by 9.4 percent, Finance Minister Tendai Biti has said.

But some economists have disputed the treasury estimates, citing slow global growth and political uncertainty.

“Few economists agree with the upbeat growth forecasts for 2012. After all, the global economic outlook has deteriorated... Growth in US is sluggish and well below trend while forecasts for Asia are being downgraded,” argued economist Tony Hawkins. 

Biti downgraded growth expectations for the mining sector for 2011 to 25, 8 percent from 33 percent, on account of the revisions in production levels for platinum, nickel and palladium. 

“However, in 2012, mining is forecast set to remain the major driving force behind overall economic growth. The sector, however, requires close to $6 billion to fund its operations,” said the Zimbabwe Chamber of Commerce.

Agricultural output rose 15 percent in 2009 and 34 percent in 2010, largely from increased tobacco production. Manufacturing growth, however, slowed down to less than 3 percent in 2010 compared to 10 percent in 2009. This year farm output is expected to increase as more land was put under tillage last year, the Agriculture ministry has said.

Tourism is also forecasted to grow as tourist arrivals spiral. The tourism ministry predicts a $5 billion contribution to the economy by 2015.

Consumer prices fell 7.7 percent in 2009, and inflation has remained within single digits but incipient upward pressures in the last quarter of 2011 saw headline consumer inflation rate accelerating to 4.9 percent year-on-year in December pushed up by higher food and beverage prices and communication and utility tariffs, according to the local statistics agency.

The government's has set itself a target of 5 percent inflation rate in 2012.
Exports are estimated to have increased by 35 percent in 2010 but imports outstripped exports last year, resulting in a huge trade deficit. During the years of economic decline the budget deficit was financed by credit creation by the Reserve Bank of Zimbabwe, setting off the hyperinflation and worsened the situation. 

Economists have emphasised the need for more exports in 2012 in the wake of deteriorating balance of payments position and urged the government to build foreign currency reserves enough to cover for about three months of imports as the country was at risk in the event of a severe global economic downturn. 

The Reserve Bank of Zimbabwe says the banking sector remained “sound”, having stabilised with low inflation and more credit to productive sectors. But a number of banks are undercapitalised and analysts have warned they were in danger of failure unless stern measures were taken this year to ensure they do not plunge the financial sector into a crisis if they go bust. In 2012, the liquidity chomp will remain as customers default on payments, at a time several banks are exposed to risk, with loan-to-deposit ratios of just over 50 percent. 

Foreign direct investment (FDI) and portfolio investment inflows have showed signs of recovery in 2009, but a trifle of capital flows remained in much of 2011, as risk-averse investors weighed their bets in the face of a hazy empowerment law and the talk of elections.

Zimbabwe saw fewer project approvals in 2011, with merely $ 125 million worth of FDI in 2011, according to the Zimbabwe Investment Authority (ZIA) figures. The trend may continue this year unless government comes clean on the political front and on electoral plans, industrialists and economists have warned.

On equities, the local bourse plunged into the red since 2010 when the government announced its vague empowerment law, which requires multinational mining companies to cede 51 percent of stakes to black locals. Principals in the coalition administration have expressed divergent views on how the rules should be implemented, dealing a blow to the liquidity-starved Zimbabwe Stock Exchange (ZSE).

The benchmark industrial index largely remained in negative territory last year, while the mining index has taken the heaviest knock.

“The outlook on the equities front, therefore, remains indifferent if not gloomy. The liquidity crunch, macro-economic policy vagueness, confidence deficit and an imminent harmonised election will definitely penetrate the veins of Zimbabwe’s equities body with the potential of infecting it with a paralysed performance in the 2012 calendar year,” said Takunda Mugaga, economist with Economitor Capital.

There is also high unemployment which is estimated at above 80 percent and could continue around that figure in 2012.