World Economics reveals game-changing estimates fo...

World Economics reveals game-changing estimates for Zim’s GDP

**The Zimbabwean economy is buoyed by its informal sector**

Audrey Galawu

World Economics Research’s estimation that Zimbabwe’s Gross Domestic Product in Purchasing Power Parity adjusted for base year and informal economy is US$67 billion, 88% larger than official statements is positive, economists say.

This comes as the official estimate for Zimbabwe’s GDP, which was US$35 billion at the end of 2022 in purchasing power parity terms, was projected to be US$67 billion, based on 2023 data which is premised on the International Monetary Fund growth rate estimates applied to World Economics GDP data.

Speaking to Zim Now, Economist, Prosper Chitambara said this is positive in the sense that it is growth although it is below the official projection.

“They are trying to estimate the size of the informal economy and include that in terms of the total GDP which is why the numbers are higher than our official statistics. Zimbabwe has one of the biggest informal economies, so taking into account that will actually mean that our GDP numbers have to increase.

“In terms of percentage change growth, I think it is in line with the increase of about 5% by government if we are saying that the economy in terms of our GDP grew to an estimated 67% from 66% from last year.

“So, in fact the percentage change in GDP, there is actually 1.5% which actually means that they are estimating that our economy grew by 1.5% this year. The figures are way lower than our official projections of their 5.3% for this year,” he said.

Zimbabwe has the second largest, by percentage, informal economy in the world, with a score of 60.6%. Afghanistan is ranked first with Nigeria third.

According to estimates, almost 5.2 million people trade in the informal economy in Zimbabwe, 65% of whom are women.

Purchasing power parity is an economic term for measuring prices at different locations. It is based on the law of one price, which says that, if there are no transaction costs nor trade barriers for a particular good, then the price for that good should be the same at every location.

In Zimbabwe, the informal sector is a basket of a wide range of activities that includes: vending, carpentry, welding, food processing, tuck-shops, farming, car washing, car parks, home industries, cross-bordering, hair-saloons, flea markets and construction among other micro-enterprises.

World Economics has developed a database presenting GDP in Purchasing Power Parity terms with added estimates for the size of the informal economy and adjustments for out-of-date GDP base year data.