Country Report Zambia January 2009

Outlook for 2009-10

• The new president, Rupiah Banda, will have to deal with an opposition angry at what it claims was election-rigging, as well as trying to maintain the unity of his own party, the Movement for Multiparty Democracy (MMD).
• Economic policy will be guided by the poverty reduction and growth facility (PRGF). However, the economic downturn will make full compliance more difficult. Fiscal targets especially are likely to be missed.
• Economic policy stagnation is a further risk as splits within the ruling MMD slow progress with the reform programme.
• The forecast for real GDP growth has been lowered to 1.6% in 2009 and 2.7% in 2010 as the global economic slowdown hits Zambia. Mining investment and production is expected to be especially badly hit by weaker prices.
• Moderating global food and fuel costs are expected to ease inflationary pressures, although currency depreciation will offset this and average inflation will come down only slowly, to 12.1% in 2009 and 11.1% in 2010.
• A large reduction in the forecast for copper prices means that the current-account deficit is expected to be larger than earlier projected, equivalent to 11.3% of GDP in 2009 and 8.9% of GDP in 2010.

Monthly review

• A fresh power struggle has emerged between the government and the largest opposition party, the Patriotic Front (PF), concerning council budgets.
• Internal divisions within the PF, as its leader attempts to remove 16 rebel MPs from parliament, has taken the focus away from its efforts to hold the government to account.
• Divisions are also badly affecting the MMD, which has cancelled a planned vote to select a new party president. Ostensibly the vote was cancelled for economic reasons, but political factors are a more likely explanation.
• The global economic crisis has made the drawing-up of the 2009 budget more difficult. In addition, controversy over the mining tax regime has required the government's urgent attention to try to find a solution.
• The government has released fresh data for the Medium Term Economic Framework (MTEF).
• The kwacha depreciated heavily in 2008 as sentiment towards emerging markets deteriorated and the death of the president, Levy Mwanawasa, led to political uncertainty.
• The worsening outlook for copper prices has caused some mining companies to scale back production and suspend new projects.

Source: Country Report

This report covers the following industry codes:
SIC Code: 37;70;60;10
NAICS Code: 336;72;52;212

This report covers the following industry codes:
SIC Code: 37;70;60;10
NAICS Code: 336;72;52;212