In the early 1970s, the economy experienced a modest boom. Real per capita earnings for blacks and whites reached record highs, although the disparity in incomes between blacks and whites remained, with blacks earning only about one-tenth as much as whites. After 1975, however, Rhodesia's economy was undermined by the cumulative effects of sanctions, declining earnings from commodity exports, worsening guerilla conflict, and increasing white emigration. When Mozambique severed economic ties, the Smith regime was forced to depend on South Africa for access to the outside world. Real gross domestic product (GDP) declined between 1974 and 1979. An increasing proportion of the national budget (an estimated 30%-40% per year) was allocated to defense, and a large budget deficit raised the public debt burden substantially.

Following the Lancaster House settlement in December 1979, Zimbabwe enjoyed a brisk economic recovery. Zimbabwe inherited one of the strongest and most complete industrial infrastructures in sub-Saharan Africa, as well as rich mineral resources and a strong agricultural base. Real growth for 1980-81 exceeded 20%. However, depressed foreign demand for the country's mineral exports and the onset of a drought cut sharply into the growth rate in 1982, 1983, and 1984. In 1985, the economy rebounded strongly due to a 30% jump in agricultural production. However it slumped in 1986 to a zero growth rate and registered a 3% contraction in GDP in 1987 due primarily to drought and foreign exchange crisis. Growth in 1988-90 averaged about 4.5%.

Since the mid-1990s, this infrastructure has been deteriorating rapidly, but remains better than that of most African countries. Poor management of the economy and political turmoil have led to considerable economic hardship. The Government of Zimbabwe's chaotic land reform program, recurrent interference with the judiciary, and maintenance of unrealistic price controls and exchange rates have led to a sharp drop in investor confidence. Since 2000, the national economy has contracted by as much as 35%; inflation vaulted over 600% (YOY) in early 2004 before subscribing to about 300% later in the year; and there have been persistent shortages of foreign exchange, local currency, fuel, and food. Direct foreign investment has all but evaporated.

Agriculture is no longer the backbone of the Zimbabwean economy. The government's controversial land reform efforts starting in 2000 have disrupted a significant portion of the commercial farm economy, leading to a sharp drop in tobacco and corn production. Corn is the largest food crop and tobacco has traditionally been the largest export crop, followed by cotton. Tobacco exports in 2004 were down about three-quarters from 2000 while both gold and cotton have now surpassed it in export earnings, the first time this has happened in the history of Zimbabwe. Poor government management has exacerbated meager corn harvests caused by drought and floods, resulting in significant food shortfalls beginning in 2001. Although the government forecasted harvests in 2004-05 sufficient to meet the countryís food needs, most independent exports agreed there would be considerable shortfalls that would require imports or aid to make up the difference.

Zimbabwe has adequate internal transportation and electrical power networks. Paved roads link the major urban and industrial centers, and rail lines tie it into an extensive central African railroad network with all its neighbors, although internal rail lines are in a state of growing. In non-drought years, it has adequate electrical power, mainly generated by the Kariba Dam on the Zambezi River but augmented since 1983 by large thermal plants adjacent to the Wankie coalfield. Telephone service is problematic, and new lines are difficult of obtain.

The largest industries are iron, steel, metal products, food processing, chemicals, textiles, clothing, furniture and plastic goods. Most manufacturers have scaled back operations. Zimbabwe is not a member of the African Growth and Opportunity Act and a number of textile businesses have migrated to other African countries. Zimbabwean producers still export lumber products, certain textiles, chrome alloys and automobile windscreens to the U.S.

Zimbabwe is endowed with rich mineral resources. Exports of gold, asbestos, chrome, coal, platinum, nickel, and copper could lead an economic recovery one day. No commercial deposits of petroleum have been discovered, although the country is richly endowed with coal-bed methane gas that has yet to be exploited.

With international attractions such as Victoria Falls, the Great Zimbabwe stone ruins, Lake Kariba, and extensive wildlife, tourism historically has been a significant segment of the economy and contributor of foreign exchange. The sector has contracted considerably since 1999, however, due to the countryís declining international image. The U.S. Government has a travel warning in effect.