Zambia Economic Forecast

Annual economic growth decelerated in Q1, dented by weaker performances in the agriculture, mining and energy sectors. Data for Q2 paints a mixed picture. The private sector PMI signaled that conditions improved on average, contrasting with an average contraction in Q1. That said, inflation rose in the quarter and the Central Bank continued to hike rates, likely hampering domestic activity. In Q3, growth seems to be cooling, as the PMI was below Q2’s level in July–August. Meanwhile, recent developments bode well for the all-important mining sector: In early September, the country agreed to return control of the Konkola Copper Mines to Vedanta, which vowed to invest USD 1 billion and repay a debt of USD 250 million. In other news, in mid-September, President Hichilema visited top creditor China, where he held talks with President Xi Jinping and signed economic cooperation agreements.

Inflation rose to 10.8% in August from July’s 10.3% due to a broad-based acceleration in price pressures. As such, it moved further above the Central Bank’s 6.0–8.0% target range. Inflation’s recent uptrend prompted the Bank to raise the key interest rate to 10.00% from 9.50% on 21–22 August. Inflation is seen remaining around current levels for the remainder of the year.