Real GDP growth in Zambia will remain subdued in 2016 at 3.4% due to a struggling copper industry and persistent power shortages. Private consumption will be restrained by higher interest rates and food costs stemming from a weak currency.
Fiscal consolidation efforts by the Zambian government will help to minimally narrow the budget deficit for 2016 to 7.1% of GDP. The government has also revised the mining tax regime to better accommodate the falling copper prices, although another revision leading to inconsistent policies will weigh on investor sentiment.
Various macroeconomic and domestic challenges will make it easier for opposition leader, Hakainde Hichilema to secure a win in the next presidential elections, taking place in August 2016. Incumbent President Edgar Lungu continues to focus on social spending in light of the upcoming elections, although we believe it will not be enough to secure public favour.
Dwindling copper revenues will continue to weigh on Zambia's current account deficit, while the capital and financial account will see a surplus as a result. The weak currency will challenge net export value, making imports more costly and overvaluing exports. The government and central bank will try to boost investor sentiment in order to increase FDI inflows and support the growing twin deficits.
The Zambian kwacha will continue its trend of depreciation in 2016 on the basis of a weak outlook for the country's copper industry. The lack of a stronger reserve arsenal means the central bank will have little in the way of ammunition to halt an expected 21.4% fall in the currency's value by year-end 2016 .
A sharper than expected Chinese slowdown keeps the copper price in decline, leading to further currency weakness and job losses as more mining companies close operations in the challenging operating environment.
Government expenditure maintains a focus on unproductive areas of the economy, such as public sector wages, while capital spending remains well below the amount necessary to improve the country's underdeveloped energy and infrastructure sectors.
|e/f=BMI estimate/forecast. Source: National Sources|
|Real GDP growth, % y-o-y||5.6||3.1||3.4||5.1|
|Nominal GDP, USDbn||25.7||16.2||13.8||14.2|
|Consumer price inflation, % y-o-y, eop||7.8||20.0||17.0||14.0|
|Exchange rate ZMW/USD, eop||6.39||11.00||14.00||15.00|
|Budget balance, % of GDP||-6.4||-7.3||-7.1||-6.3|
|Current account balance, % of GDP||-1.5||-5.3||-6.0||-4.9|
The Zambia Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in The Zambia and is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market..
An influential new analysis of The Zambia's economic, political and financial prospects through end-2017, just published by award-winning forecasters, Business Monitor International (BMI).
- Forecast the pace and stability of The Zambia's economic and industry growth through end-2017.
- Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
- Assess the critical shortcomings of the business environment that pose hidden barriers and costs to corporate profitability.
- Contextualise The Zambia's country risks against regional peers using BMI's country comparative Risk Ratings system.
- Evaluate external threats to doing business in The Zambia, including currency volatility, the commodity price boom and protectionist policies.
BMI provides our fully independent 5-year forecasts for The Zambia through end-2017 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.
Economic Outlook Contents
The Zambia Country Risk Report features BMI's forecasts with supporting analysis for 2013 through to end-2017, set against government views and BMI's evaluation of global and regional prospects.
Key Areas Covered:
- Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
- BMI's comprehensive Risk Ratings system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.
- Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
- Balance of Payments - trade and investment, current and capital account.
- Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
- Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
- Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
- Foreign Direct Investment - approvals, inflows and climate.
- External Debt - debt profile (short and long-term plus public and private sector exposure).
- Global Assumptions - forecasts for each year to end-2017 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.
- Rely upon BMI's 100% independent forecast scenarios for The Zambia and underlying assumptions - we take no advertising and are privately-owned.
- Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on The Zambia, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
- Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.
What are the political risks to doing business in The Zambia over the next 5-years?
BMI's The Zambia country Risk Ratings evaluate the short- and medium-term threats to political stability.
Political Outlook Contents
- SWOT Analysis for the Zambian Market - Political Strengths, Weaknesses, Opportunities and Threats facing The Zambia.
- Political Stability and Risk Assessment - BMI's Risk Ratings assess explicit short- and long-term risks to political stability; latest ratings, rankings and trends for The Zambia's risk are compared with regional and global averages.
- Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
- Benchmark The Zambia's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
- Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
- Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.
Business Environment Risk Ratings with SWOT Analysis - Business environment Risk Ratings for The Zambia, benchmarked against ratings for regional neighbours.
Country Competitiveness - Competitiveness of The Zambia's business operating environment in supporting corporate growth and profitability, compared with regional neighbours.
Business Environment Contents
- Domestic Environment - Transparency, cronyism and corruption; labour market flexibility; corporate tax burden; interest rate levels; sophistication of banking sector and stock market; levels of business confidence; infrastructure and IT.
- Foreign Direct Investment - Analysis of foreign investment regime; foreign ownership laws; attractiveness of business environment to foreign investors.
- Foreign Trade - Analysis of trading environment, government trade policy, liberalisation measures, tariffs and membership of trade areas.
- Assess your company's evolving exposure to country specific operational and business risks, using BMI's in-depth analysis of the legal and regulatory business environment.
- Understand your market's comparative strengths and weaknesses in the key areas of commercial infrastructure and business institutions, using BMI's proprietary global Business Environment Risk Ratings.