By AARON CHIYANZO
THE Economist Intelligence Unit (EIU) has predicted that copper prices will begin to increase by 2020 and in turn lead to appreciation of the Kwacha against the dollar by next year.
The unit stated in its Political and Economic Outlook Report ending March 28, 2020, that the Kwacha’s pace of depreciation will slow in 2021 as copper prices recover from their 2020 fall and transit routes normalise.
It states that amid rising inflation and the widespread departure of foreign investors fuelled by a growing sovereign debt risk and the collapse of international commodity prices in 2020, as well as some disruption to export routes because of the Coronavirus, the kwacha now would depreciate heavily against the US dollar.
“The Kwacha will begin to appreciate against the dollar, to an average of K14.10 per US$1 in 2024 amid continuous copper price increases from 2020, peaking at US$314/lb in 2024,” the unit stated.
And the unit stated that economic growth in 2020 to 2024 would be below Zambia’s long-term potential.
It states that in 2020, the economy would contract by 3.4 percent in real terms, owing to the coronavirus-related global shutdown, which includes border closures in some of Zambia’s transit routes for goods traffic.
“This will be problematic for the mining sector even after Chinese demand recovers later in 2020, and throughout the year we expect Zambia’s economic contraction to be aggravated by quarantine measures to stem the domestic spread of the coronavirus.
“Low water levels at the Kariba hydroelectric dam (Zambia’s main source of power) also make a return to normal power supply this year unlikely.
This will affect industrial production outside the mining sector, where supply is being prioritized,” the EIU predicted.
The EIU stated that driven by rising copper prices during 2021 to 2024 and important export routes being reopened, growth was however forecast to quicken to 3.2 percent in 2021.
It states that the growth would be supported to some extent by a recovery in the mining sector as copper prices rise and electionrelated spending.
“We expect growth to continue rising in 2022, to 3.9%, as monetary loosening and high copper prices – and the resulting increased mining growth – during these years will soften the impact. Overall, we expect growth to rise to 5.5% in 2024, in line with increases in copper production as international prices soar,” the unit stated.
The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For 60 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide.
By AARON CHIYANZO