Zimbabwe’s Growth Rebound Is Hitting a Wall: Too Few Productive Jobs

Zimbabwe’s recent gains in inflation control and economic growth have created an opportunity to address a deeper problem: an economy in which most workers remain informal, incomes are low and productive employment has failed to keep pace with headline growth. The World Bank’s Zimbabwe Growth and Jobs Report argues that maintaining stability while tackling infrastructure, regulation, investment constraints and debt could determine whether the country moves toward higher-value job creation or remains dependent on low-productivity work.

Zimbabwe's economic landscape is beginning to shift after years of persistent inflation, currency volatility and fiscal pressure. Tighter monetary and fiscal management pushed local-currency inflation into single digits in early 2026, while real GDP expanded by nearly 6% on average between 2021 and 2025.

However, growth has not translated into widespread gains in productive employment, household incomes or economic security, leaving Zimbabwe with an economy that is expanding faster than the quality of work available to most of its people.

Around 80% of Zimbabweans work in the informal sector, where median monthly earnings stand at about $130, while nearly half the population lives below the international poverty line. The bigger challenge now is turning Zimbabwe's economic growth into a broader improvement in livelihoods, with more productive businesses, formal employment and wages that rise with the economy.

Economic Stability Has Improved, but the Labour Market Has Not Kept Pace

The decline in inflation represents a significant change in Zimbabwe's economic environment because stability is a prerequisite for investment, business planning and household confidence. Companies are less able to make long-term decisions when prices, currencies and operating costs are constantly shifting, while workers see their real incomes eroded when inflation remains persistently high.

However, stabilisation is only the starting point. Zimbabwe's recent experience demonstrates why stronger GDP growth cannot by itself be treated as evidence that living standards are improving broadly across the economy. The composition of employment matters at least as much as the rate of expansion.

Workers have been moving away from agriculture, but much of that transition has been toward low-productivity retail and informal service activities rather than manufacturing or higher-value services. That limits the productivity gains normally associated with structural economic transformation and helps explain why economic growth has not produced stronger improvements in wages.

This pattern creates a difficult development trap. Workers may technically be leaving lower-productivity sectors, yet if they are moving into equally insecure or low-productivity activities, the economy gains little of the productivity dividend needed to raise incomes sustainably.

Informality Is Becoming Zimbabwe's Central Growth Challenge

An informal economy of Zimbabwe's scale is not simply a labour-market statistic. It shapes tax collection, access to finance, productivity, investment and the ability of firms to grow beyond subsistence-level activity, making informality both a symptom and a cause of the country's economic weaknesses.

For many businesses, remaining informal can be a rational response to high regulatory costs, complicated licensing systems, administrative fees and uncertain tax obligations. Formalisation therefore cannot depend only on stronger enforcement; businesses must also see tangible advantages in entering the formal economy.

Simplifying business permits, reducing administrative charges, easing cross-border trade procedures and streamlining tax policy could lower some of those barriers. If formal firms can gain more reliable access to finance, markets, legal protections and investment opportunities, the incentive structure facing small businesses could begin to change.

The challenge is ensuring that formalisation does not simply impose new costs on enterprises already operating on thin margins. The quality of regulation, the predictability of enforcement and the economic benefits available to formal businesses will determine whether reforms encourage expansion or push smaller enterprises further outside the formal system.

Power Shortages and Weak Investment Conditions Are Holding Back Productivity

Zimbabwe's employment challenge cannot be separated from the infrastructure constraints facing businesses. Electricity shortages alone are estimated to cost the country the equivalent of 6.1% of GDP annually, illustrating how severely unreliable power can restrict production, raise operating costs and discourage longer-term investment.

For manufacturers and other energy-intensive businesses, unreliable electricity makes expansion riskier and more expensive. It also weakens Zimbabwe's ability to shift workers toward industries capable of generating larger productivity gains and more stable employment.

Improving generation capacity and grid reliability therefore has implications that extend well beyond the power sector. Better electricity supply could support manufacturing, agriculture, services and small enterprises simultaneously, while investments in transport corridors and irrigation could address additional bottlenecks affecting production and market access.

Private investment will also depend on broader institutional conditions. Stronger land tenure, more effective commercial justice, deeper financial markets, improved access to credit and greater regulatory certainty for foreign investors could influence whether businesses are willing to commit capital for the long term.

The Real Test Is Whether Reform Can Change the Structure of Growth

Zimbabwe now faces a clear divergence between two possible economic trajectories. Under the current course, growth is projected to average around 4% through 2030, potentially delaying the country's ambition of reaching upper-middle-income status until 2036.

Faster structural reforms could produce a substantially different outcome. Real GDP could rise an additional 10.7% above the baseline by 2030 and 26.9% by 2040, while supporting the creation of as many as 230,000 additional jobs and raising real worker earnings by more than 30% over the same period.

The projections depend on reforms being implemented consistently, institutional weaknesses being addressed and macroeconomic stability being sustained over several years rather than treated as a short-lived achievement.

Debt and arrears resolution will also remain critical because access to concessional external financing could affect the government's capacity to fund infrastructure and broader development priorities. Maintaining fiscal discipline while simultaneously addressing power, transport, irrigation and investment constraints will require careful sequencing.

The strongest near-term gains may come from tackling electricity reliability and trade facilitation, where improvements could reduce costs across large parts of the economy. Deeper reforms to legal institutions, finance and investor protections would then need to build confidence sufficient to support sustained private-sector expansion.