Zambia’s economy set for growth
By BUUMBA CHIMBULU
THE Zambian economy is set for moderate growth this year driven by a robust agriculture production and high copper prices after exiting recession in the first quarter of 2021, according to a latest Fitch Solutions report on Zambia Country Risk.
Fitch Solutions has forecast real Gross Domestic Product (GDP) growth of 2.4 percent in Zambia in 2021, following a modest expansion of 0.7 percent year on year in the first quarter of 2021.
According to Fitch, real GDP growth in Zambia would be relatively tepid over the next 10 years, averaging 3.2 percent annually from 2021 to 2030, compared to 4.9 percent between 2010 and 2019.
Fitch has retained its forecast of 2.4 percent growth in 2021, below the country’s 2010 to 2019 average of 4.9 percent.
The report has indicated that Fitch Solutions expected that growth would accelerate further to 2.8 percent in 2022, but remain below trend.
“We at Fitch Solutions expect that Zambia’s economy will continue to expand over the coming quarters, after exiting recession in Q121. Real GDP growth came in at 0.7 percent year on year in first quarter of 2021.
“Robust agricultural production and the easing of lockdown restrictions will support private consumption, but headwinds from high inflation will persist,” the report stated.
Fitch believed that a continued recovery in consumer activity would drive GDP growth higher over the remainder of 2021, particularly given more favourable base effects from the second quarter of 2021.
It expected that some progress on the fiscal policy front, including a likely International Monetary Fund (IMF) programme, would go some way towards restoring investor confidence, contributing to greater exchange rate stability next year.
“This will reduce imported inflation, easing pressures on household purchasing power. As private consumption continues to strengthen and private investment picks up, we forecast that real GDP growth will accelerate further to 2.8 percent in 2022,” Fitch stated.
Fitch stated that the copper mining and processing sector would remain the mainstay of the economy, but a burdensome tax environment as the government tried to raise revenue to rein in wide budget deficits will dampen the investment outlook.
“Moreover, the need for fiscal consolidation will also limit room for public investment over the early years of our forecast period, keeping medium-term growth weak,” Fitch indicated.