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Cablegate: How Fast Can an Economy Recede?

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS HARARE 000083

SIPDIS

SENSITIVE

STATE FOR AF/S AND AF/EX
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER
USDOC FOR 2037 DIEMOND
PASS USTR ROSA WHITAKER
TREASURY FOR ED BARBER AND C WILKINSON
USAID FOR MARJORIE COPSON

E. O. 12958: N/A
TAGS: EFIN ECON ZI
SUBJECT: How fast can an economy recede?


Sensitive but unclassified.

1. (SBU) Washington-based Zimbabwe watchers may have
noted that the Economist Intelligence Unit (EIU) recently
projected "only" a 9 percent decline for Zimbabwe's
fledging economy in 2003. By contrast, most local
economists are predicting at least minus 12 percent and
even the GOZ -- which, we presume, believes in its
policies -- forecasts minus 7.2 percent. We recently
asked Harare-based Guardian correspondent Andrew Meldrum,
who does much of the legwork for the EIU, about this
conservative outlook. He told us the EIU simply does not
believe a peacetime economy, no matter how bad its
stewardship, can shrink by over 10 percent year after
year. In spite of its own data, the EIU believes the
speed of Zimbabwe's freefall is now testing structural
limits.

Comment
-------
2. (SBU) Although there are historical parallels,
Zimbabwe has become a sort of laboratory for bad
macroeconomics. Even if 9 percent is conservative, the
EIU still reckons that Zimbabwe will retain its standing
in 2003 as the world's worst performing economy. However,
the extent of recession will depend on whether the GOZ
modifies its heavy-handed interventionism. If the GOZ
eliminates the official exchange rate, price controls and
export disincentives, the economy will perform
considerably better.

Sullivan

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