COVID-19 and Trade in Zimbabwe: An Auto-Regressive Distributed Lag (ARDL) Analysis

Abstract

This study examined the impact of COVID-19 pandemic on trade in Zimbabwe for the period 03/2020 to 06/2022. The pandemic  necessitated the enforcement of lockdown measures. Prudent as they are, they brought several socio-economic problems. However,  during this period, trade outperformed the previous comparable period. This motivated the current study which provides a novel  contribution to the impact of COVID-19 in Zimbabwe. The current study is the first to provide an econometric COVID-19 impact analysis,  let alone on trade in Zimbabwe. The auto-regressive-distributed-lag (ARDL) estimation technique was used to analyze the relationship.  The headline result is that the COVID-19 pandemic had an unfavorable impact on total trade and exports and a favorable impact on  imports. The impact was bigger and more significant on imports than exports. This suggested expenditure switching from foreign to  locally produced goods. The results provide a case for revamping the import substitution industrialization approach. Specifically, the  government should support firms producing import-substituting goods. To avoid failures of previous ISI approaches, the focus should be  on reducing import dependency through increasing local firms’ productivity and competitiveness through value-addition and  beneficiation. Furthermore, it is time for Zimbabwe to penetrate emerging foreign markets. This can be done by export incentive  schemes such as favorable export surrender requirements and (2) simpler import and export procedures. Also, the private sector needs  to (1) glocalise (attracting foreign investment towards local production) and (2) enhance value addition and beneficiation to produce  high-end goods that are currently exported as raw materials and/or semi-finished.