Zambia Economic Outlook

December 13, 2019

Growth slumped to a three-and-a-half-year low in the second quarter on a contraction in mining activity. Particularly, oversees demand for copper was soft, while energy output fell as the worst drought in a century severely curtailed output at the country’s all-important hydropower dams. Similar dynamics carried over into Q3, with exports falling more sharply and severe drought conditions persisting in the quarter. Turning to Q4, momentum seems to have weakened further. Rising concerns over the country’s fiscal and debt sustainability sparked a selloff of the kwacha, which fell to an all-time low in December. This bodes ill for both investment activity and consumer demand, amid soaring inflation and deteriorating sentiment. In a move to ensure macroeconomic stability, the Central Bank tightened its monetary policy stance in November and raised the reserve ratio for commercial banks in December.

Zambia Economic Growth

Growth is expected to pick up next year, although it will likely remain subdued. More favorable weather conditions, a zero-rate capital tax and the completion of several dams and hydropower plants should prop up the agricultural and energy sectors. That said, macroeconomic instability due to soaring public debt and shrinking foreign reserves are major risks to the outlook. FocusEconomics panelists expect GDP to grow 2.4% in 2020, which is down 0.3 percentage points from last month’s forecast, and 3.2% in 2021.

Zambia Economy Data

	2014	2015	2016	2017	2018
Population (million)	15.2	15.7	16.2	16.7	17.2
GDP per capita (USD)	1,810	1,685	1,508	1,293	1,566
GDP (USD bn)	27.6	26.5	24.5	21.6	27.0
Economic Growth (GDP, annual variation in %)	5.1	4.7	2.9	3.8	3.5
Industrial Production (annual variation in %)	3.9	1.9	0.2	2.5	3.5
Fiscal Balance (% of GDP)	-6.2	-5.7	-9.3	-5.8	-7.7
Public Debt (% of GDP)	27.1	36.1	62.3	60.7	62.7
Money (annual variation in %)	11.8	11.3	24.9	0.1	20.7
Inflation Rate (CPI, annual variation in %, eop)	7.1	7.9	21.1	7.5	6.1
Inflation Rate (CPI, annual variation in %)	7.0	7.8	10.1	17.9	6.6
Policy Interest Rate (%)	9.75	12.50	15.50	15.50	10.25
Exchange Rate (vs USD)	5.55	6.40	11.00	9.93	10.01
Exchange Rate (vs USD, aop)	5.39	6.16	8.66	10.31	9.54
Current Account (% of GDP)	-0.8	2.3	-2.3	-3.2	-1.6
Current Account Balance (USD bn)	-0.2	0.6	-0.6	-0.7	-0.4
Trade Balance (USD billion)	1.6	1.7	0.2	0.2	1.0
Exports (USD billion)	10.8	10.2	7.4	6.5	8.2
Imports (USD billion)	9.2	8.6	7.2	6.3	7.3
Exports (annual variation in %)	13.9	-5.7	-28.0	-11.2	25.7
Imports (annual variation in %)	16.0	-6.9	-16.0	-12.5	15.2
International Reserves (USD)	2.7	3.1	3.0	2.4	2.1

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Zambia Facts

	Value	Date
Bond Yield	33.00	Dec 31
Exchange Rate	14.09	Jan 01
Stock Market	0.3	Jan 06

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