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Zambia Business Forecast Report Q4 2014

  • September 2014
  • -
  • Business Monitor International
  • -
  • 42 pages

Core Views
T he threat posed to the Zambian economy by currency weakness has subsided over recent months and we maintain our 2014 and 2015 real GDP growth forecasts at 6.7% and 7.0% respectively. Domestic demand is set to be the main engine of this expansion. Zambia’s monetary authorities will reverse some of the extraordinary tightening measures introduced to support the currency in H114 amid signs that the kwacha has stabilised. However, the benchmark policy rate will be held at 12.00% for 2014 and 2015 owing to lingering price and currency pressures.

Zambia’s current account will fall into deficit in 2014 and remain in the red over the remainder of our forecast period to 2023 thanks to falling copper prices and subdued copper production growth. A balance of payments crisis will be prevented by foreign direct inflows.

Major Forecast Changes
N o major forecast changes.

Table Of Contents

Zambia Business Forecast Report Q4 2014
Executive Summary. 5
Core Views..5
Major Forecast Changes5
Key Risks To Outlook5
Chapter 1: Political Outlook. 7
SWOT Analysis.. 7
BMI Political Risk Ratings 7
Domestic Politics . 8
Succession Battle Has Implications For Policy..8
President Michael Sata's failing health will likely force him to resign possibly before the end of 2014 and this is fuelling a succession
battle within the ruling Patriotic Front. This contest is pitting supporters of the reformist finance minister against left-leaning political
leaders, and will have a profound impact on Zambia's future policy direction.
Table: Political Overview..8
Long-Term Political Outlook 9
A Question Of Policy, Not Politics9
Zambia boasts a competitive political environment that has been characterised by closely contested and increasingly freer and fairer
elections (according to observers). However, issues such as corruption and income inequality will require redress over the coming
decade, in order to keep Zambia on a progressive political and economic growth trajectory.
Chapter 2: Economic Outlook 13
SWOT Analysis 13
BMI Economic Risk Ratings... 13
Economic Activity... 14
Domestic Demand To Drive GDP Growth Amid Downside Risks.14
The threat posed to the Zambian economy by currency weakness has subsided over recent months and we maintain our 2014 and 2015
real GDP growth forecasts at 6.7% and 7.0% respectively with domestic demand set to be the main engine of this expansion. The risks
are to the downside and stem from the possibility that foreign investment inflows decline amid policy uncertainty.
Table: Economic Activity..14
Balance Of Payments . 15
Current Account Balance To Turn Negative, But No Crisis Ahead..15
Zambia's current account will fall into deficit in 2014 and remain in the red over the remainder of our forecast period to 2023 thanks to
falling copper prices and subdued copper production growth. A balance of payments crisis will be prevented by foreign direct inflows,
but risks are to the downside.
Table: Current Account...16
Monetary Policy .. 17
Monetary Policy To Be Loosened But Rates On Hold...17
Zambia's monetary authorities will reverse some of the extraordinary tightening measures introduced to support the currency in H114
amid signs that the kwacha has stabilised. However, the benchmark policy rate will be held at 12.00% for 2014 and 2015 owing to
lingering price and currency pressures.
Table: Monetary Policy18
Exchange Rate Policy 19
ZMW: Renewed Downside Pressures Ahead19
The Zambian authorities have been successful at supporting the kwacha by aggressively tightening monetary policy. This is not,
however, a long-term solution to currency in stability and the unit will face renewed downside pressures over the long-term. Our longterm
forecasts currently envisage relatively slow but steady deprecation as a result of these pressures. Risks are weighted firmly to the
downside.
Table: CURENCY FORECAST..19
Chapter 3: 10-Year Forecast... 21
The Zambian Economy To 2023. 21
Mines Both A Driver Of And Risk To Growth.21
On the back of an improving regional outlook and good prospects for the mining sector, we are projecting average annual growth of
6.9% over our forecast period to 2023. Buoying this strong performance will be a strengthening private sector, as well as ongoing
investment in mining, agriculture and infrastructure, aided by a favourable business environment.
Table: Long-Term Macroeconomic Forecasts21
Chapter 4: Business Environment. 23
SWOT Analysis 23
BMI Business Environment Risk Ratings.. 23
Business Environment Outlook. 24
Institutions... 24
TABLE: BMI BUSINES AND OPERATION RISK RATINGS24
Table: BMI LEGAL FRAMEWORK RATING.25
Table: LABOUR FORCE QUALITY..26
Infrastructure... 27
TABLE: ANUAL FDI INFLOWS27
Table: TRADE AND INVESTMENT RATINGS.28
Market Orientation... 29
Operational Risk.. 30
Table: Top Export Destinations30
Chapter 5: Key Sectors.. 33
Pharmaceuticals and Healthcare... 33
Table : Pharmaceutical Sales , Historical Data And Forecasts 34
Table : Gover nme nt Healthcare Expe nditure Tre nds , Historical Data And Forecasts . 35
Table : Healthcare Expe nditure Tre nds , Historical Data And Forecasts 35
Table : Pri vate Healthcare Expe nditure Tre nds , Historical Data And Forecasts ... 36
Other Key Sectors... 39
Table: Infrastructure Sector Key Indicators...39
Table: Autos Sector Key Indicators...39
Table: Telecoms Sector Key Indicators39
Table: Food and Drink Sector Key Indicators.40
Chapter 6: BMI Global Assumptions. 41
Global Outlook. 41
Eurozone Downgrade On Poor Q214..41
Table: Global Assumptions.41
Table : Developed States , Real GDP Growt H, %...42
Table : BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %. 42
Table : Emergi ng Mar kets , Real GDP Growth , %..43

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