Role of Macroeconomic Factors Predicting Financial Performance of Commercial Banks in Zimbabwe 1990-2023

Lawrence Dumisani Nyathi, David Kureya and Wilfred Petegumbo
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Lawrence Dumisani Nyathi: Department of Banking & Economic Sciences, Faculty of Business & Economic Sciences, National University of Science and Technology, Bulawayo, Zimbabwe
David Kureya: Graduate-Department of Banking & Economic Sciences, Faculty of Business & Economic Sciences, National University of Science and Technology, Bulawayo, Zimbabwe
Wilfred Petegumbo: Graduate-Department of Banking & Economic Sciences, Faculty of Business & Economic Sciences, National University of Science and Technology, Bulawayo, Zimbabwe

International Journal of Research and Innovation in Social Science, 2025, vol. 9, issue 5, 2048-2062

Abstract: The financial performance of commercial banks is intricately linked to the macroeconomic environment in which they operate. In Zimbabwe, a country characterized by economic volatility, hyperinflation, and fluctuating exchange rates, understanding the role of macroeconomic factors in shaping bank performance is critical. Therefore, this study investigates the extent to which key macroeconomic variables influence the profitability, stability, and overall financial health of commercial banks. Using a General Moments Methods (GMM) approach the study reveal that macroeconomic instability, particularly high inflation and volatile exchange rates, significantly impacts bank profitability and asset quality. Conversely, periods of economic growth and stable monetary policies are associated with improved financial performance. The study also highlights the resilience of Zimbabwean banks in navigating economic challenges, underscoring the importance of adaptive strategies and robust risk management practices. This research contributes to the broader discourse on the interplay between macroeconomic conditions and banking performance, offering valuable insights for policymakers, bank managers, and financial analysts. Therefore, the study recommends that government of Zimbabwe should address economic problems facing the entire economy. The poor macroeconomic instability facing the country also weighs down heavily to the banking sector. Due because of the poor economic environment and perceived risk tied to the country, local commercial banks are facing significant challenges to attract fresh capital from the international market.

Date: 2025
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