BMI View: Despite low copper prices, we anticipate real GDP growth of 6.0% in Zambia in 2015, from an estimated 6.0% in 2014. Private and government consumption will remain the key drivers of growth, with resilient domestic demand helping to offset weaknesses in the export sector. Growth will also be supported by a stable inflationary environment. This may prompt the government to stick with its commitment to strengthening policies of providing affordable and quality health care.
Headline Expenditure Projections
Pharmaceuticals: ZMW1.48bn (USD241mn) in 2014 to ZMW1.67bn (USD219mn) in 2015; +12.7% in local currency terms and -9.2% in US dollar terms. Forecast increased compared to the previous quarter.
Healthcare: ZMW8.32bn (USD1.35bn) in 2014 to ZMW9.47bn (USD1.24bn) in 2015; +13.9% in local currency terms and -8.3% in US dollar terms. Forecast remains flat compared to the previous quarter.
Zambia has a Risk/Reward Index (RRI) score of 32.3 out of 100, making it the 24th most attractive pharmaceutical market in the Middle East and Africa (MEA) region. This represents a downgrade by two positions since the last quarter.
Key Trends & Developments
Zambian Health Minister Joseph Kasonde has instructed the newly-appointed board of the Zambia Medicines Regulatory Authority (ZAMRA) to put focus on developing an environment for domestic pharmaceutical industry growth. The board needs to also strengthen the licensing system for various participants in the industry under recently introduced legislation, Kasonde noted. Furthermore, the board has been tasked with protecting the country from harmful substandard and counterfeit drugs. Such fake medicines have been on the rise as a result of the rapid globalisation of pharmaceutical trade in the country.
The Swedish government has resumed healthcare aid to Zambia, ending a six-year health aid ban imposed due to concerns over financial misapplication. The move clears the way for the release of up to SEK400mn (USD47.3mn) in funds, according to a press release from the Zambian Embassy in Stockholm. The fund will be used to finance projects that aim to decrease infant and maternal mortality rates, and deal with other reproductive health challenges. As part of the funding, Zambia will receive an initial payment of SEK69mn (USD8.07mn) for the programme that will run for four years starting from 2015. The Swedish government is offering the financial assistance jointly with the UK's Department for International Development.
A newly built ZMW20mn (USD2.7mn) hospital will be opened in the Mpulungu district of Zambia's Northern Province in August 2015. The hospital, which has been under construction since 2010, has reportedly reached its final completion stage. Most of the work on the hospital has already been completed, with only pavements and water connections to the facility needing to be finished. The first hospital in the district will help to improve healthcare services and decongest existing health centres, according to Health Deputy Minister Chitalu Chilufya. A total of 10 staff houses have been built near the health facility, according to Mpulungu District Commissioner Juliana Chuzu.
BMI Economic View
Zambia's economic risk score has remained relatively low given the country's vulnerability to external conditions, specifically variable global demand for copper. That said, its score has been improving. Inflation has been lower over recent years than historic precedent, but the volatility of the kwacha is likely to limit the extent of the moderation. Over the long term, the country's economic score will be boosted by higher copper output, international interest in the agricultural sector, and plans for diversification and to increase power output.
BMI Political View
Zambia's impressive short-term political risk score of 61.3 out of 100 reflects a lack of significant external threats. In addition, the country is committed to the democratic process; this poses minimal risk of unconstitutional change, even if widespread poverty makes public protest a lingering possibility. The election of Patriotic Front candidate, the late Michael Sata, as president in September 2011 suggests that there is public support for his populist brand of politics and this poses risks to policy continuity. However, the peaceful, democratic transition of power from Sata, who died in 2014, to Edgar Lungu, who won the presidential by-election in January 2015, reaffirms our general belief that Zambia's reputation for political stability is warranted.