Macroeconomic and Structural Adjustment Policies in Zimbabwe

By Clever Mumbengegwi | Go to book overview

8
The Crisis in Asia: Are There Lessons for Zimbabwe?

JamesGordon


1 Introduction

The period 1997–98 was an exceptionally turbulent period for emerging markets, with financial market instability sweeping from Thailand across Asia, and, later, affecting Russia and South Africa. Zimbabwean financial markets have not been immune from this turbulence and the question of whether there is anything for Zimbabwe to learn from the Asian crisis is the subject of this chapter. Before addressing this question, it is worth considering the likelihood of uncovering general lessons for Zimbabwe from the Asian crisis.

First, it is important not to lose sight of the obvious point that the Zimbabwean economy is very different from the Asian crisis economies. To begin with, the economic structures are fundamentally dissimilar, with the agricultural and mining sectors far more important in Zimbabwe than they are in the Asian crisis economies (for example, these two sectors generate over half of Zimbabwe's exports, but less than 5 per cent of exports from Korea). Moreover, in contrast to Zimbabwe, the Asian economies have grown rapidly over the past three decades, with high levels of savings and investment. The conduct of macroeconomic policies has also been dissimilar. Unlike Zimbabwe, the Asian crisis economies have a history of low inflation and generally balanced fiscal positions. These fundamental differences should serve to limit the applicability of the recent Asian experience to Zimbabwe. If, as it seems from the Asian case, financial crisis strikes fast-growing, rapidly industrializing economies, care has to be taken in drawing lessons for an economy such as Zimbabwe that does not display similar characteristics. Second, it would be ironic to be advising a country like Zimbabwe to be ‘less like Asia’, when until recently non-Asian developing countries were being encouraged to be ‘more like Asia’ (so as to emulate the ‘Asian miracle’). This shift in views argues for some humility in attempting to draw lessons for Zimbabwe from the Asian crisis.

These caveats aside, Zimbabwean financial markets have encountered turbulence since 1997. Moreover, financial markets often tend to take a

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