Boston, MA -- (SBWIRE) -- 07/25/2013 -- Election timing remains uncertain in Zimbabwe with signs of infighting in his ZANU-PF party potentially dampening President Robert Mugabe's desire to hold elections as soon as possible. As we have argued for some time however, more important than election timing is the environment in which they take place. With Prime Minister Morgan Tsvangirai's MDC party's demand for security sector reform looking almost certain not to be fulfilled, we believe the battle will shift to the level of international observation of the election.

Economic growth will very much depend on what happens at the elections. We believe that an outright victory for any major party would see the economy expand more quickly in the years ahead, than would be the case if power is once again shared.

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Inflation in Zimbabwe is likely to remain low over the course of 2013 thanks to low demand and a weak South African rand which will keep a lid on imported inflationary pressure but could rise higher quickly if investment suddenly surges in following a successful election.

Major Forecast Changes

No major forecast changes

Key Risks To Outlook

The political environment presents the most salient risk to our outlook for the Zimbabwean economy. If upcoming elections descend into violent chaos or if the security forces refuse to accept an MDC victory, our growth forecasts would likely be rendered too optimistic. On the other hand, if there is a quicker, more decisive resolution to ongoing political uncertainty, foreign investment would likely flow quickly into the country and would cause our forecasts to prove pessimistic.

There are significant policy risks. Premature abandonment of the foreign currency regime, for instance, would likely have a negative impact on the economy.

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