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STOCK markets across the world mirror what is happening in an economy; activity, sentiment and prospects among many other considerations. This should exhort policy makers to spare a thought for the patently ailing economy; because the stuttering stock market is evidence of big trouble.

When the economy sneezes, investors have good reason to suspect that their investments are in danger; they react in one way or the other. They adjust their positions in the market to hedge against potential risk. Sometimes they exit the market altogether and seek safer investment havens.

The manner in which they look at risk and potential returns also affects how much they are willing to pay to acquire shares in publicly listed companies. Zimbabwe is no exception to the general dictates and dynamics that shape the direction and trend that stock markets take in their day to day operation.

In our edition of The Herald Business yesterday, we reported that the Zimbabwe Stock Exchange lost US$538 million of value in the 10 months to October. The value lost is testament to the fact that companies are struggling for viability.

Statistics from ZSE showed that the local bourse’s market capitalisation stood at US$5,23 billion in October last year, but had dropped to US$4,664 billion by October this year, reflecting that something is wrong with the economy.

Undoubtedly, this mirrors the myriad of problems Zimbabwe is facing that require urgent and effective solutions to arrest further economic decline.

There is virtually no production and the little that is being produced is being consumed. The economy is not generating any surplus value for investment. We are living on imports, consumptive imports hence yes we are in a subsistence economy. The Government sector is no different, 76 percent of the budget is recurrent expenditure, mostly wages for the civil service.

Good economic performance is a function of appropriate mix of Government policies. As such, judging by the performance of the ZSE, Government needs to self-introspect with a view to taking corrective measures.

The Confederation of Zimbabwe Industries manufacturing sector survey revealed that industry’s production capacity, dropping to 36,3 percent, remains worrisome.

We need to take immediate corrective measures to ensure that we do not undo the gains that have been achieved since dollarisation of the economy in 2009.

The country’s trade deficit in the nine months to September was US$2,84 billion from imports of US$4,65 billion and exports of US$1,81 billion. Imports continue to drain the little liquidity industry desperately needs to survive. Following its latest review of the country’s performance under a staff monitored programme, the International Monetary Fund said while Zimbabwe had done well, a number of recurring problems remained a challenge.

These include current account deficit, tight liquidity, lack of fiscal space to support key infrastructure projects and limited funding for social services such as health and education among other problems facing Government.

However, it is without doubt that Zimbabwe still holds unlimited potential to turn around the fortunes of its economy as it has prime agricultural land, abundant minerals-gold, platinum, diamonds, coal, nickel and chrome out of the more than 40 different resources it boasts.

On top of these natural resources, Zimbabwe has a skills base which is second to none to transform the potential lying within these minerals to grow the economy.

The downward spiral movement of the Zimbabwe Stock Exchange sends wrong messages to prospective investors, as it is one of their main reference points when assessing whether or not to commit their investments. This is why Government should attend to the problems which are threatening to undermine its efforts to turn around the economy.