Economics & Development

Zimbabwe’s recent macroeconomic stabilization has created an important window of opportunity but translating it into sustained growth and productive employment requires adopting an ambitious reform agenda. After two decades of macroeconomic instability and lack luster growth, Zimbabwe has recently made genuine progress. Growth averaged almost 6 percent between 2021 and 2025, and local currency inflation fell to single digits in early 2026 for the first time since 1997. Durably anchoring macroeconomic stability remains essential but not enough. The deeper challenge is that Zimbabwe is growing without transforming. Labor is moving out of agriculture but into low productivity services rather than higher-value industries. Four in five jobs remain informal, median wages stand at just US$130 per month, and nearly half the population remains below the international poverty line. Without structural change, GDP growth will average just 4 percent through 2030 (well below the NDS2 target) and Zimbabwe will not reach upper middle-income status until 2036, six years behind its Vision 2030 goal.

A country-specific version of MFMod was estimated using the latest available data. The model uses the US dollar as its base currency to avoid currency-related complications, which improves the reliability of real-economy modelling but limits the model's ability to capture the implications of local currency volatility. A baseline scenario was constructed through 2050, reflecting a plausible long-term development path on the macroeconomic and fiscal trajectory in the absence of new reforms. The baseline pathway is aligned with MPO projections released in April 2026. All policy simulations are evaluated relative to this baseline. MFMod is a semi-structural macro-fiscal model that links output, prices, public finances, and the labor market. In the long run, output converges to a balanced growth path determined by total factor productivity (TFP), capital, and labor (including human capital). In the short run, nominal rigidities in wages and prices allow demand shocks to have nominal and real effects. For the CGJR, MFMod is used to trace how reforms affect aggregate demand, potential output, and labor market outcomes, and to quantify how policies translate into growth and more and better jobs.