Economic Outline

Economic Indicators

Zambia's real GDP growth has shown consistency, expanding by 6.2% in 2021 and 5.2% in 2022. Despite an initial downward adjustment to the 2023 growth forecast, now at 2.7% from an initial 4.2%, recent data indicates a more positive trend, with an average growth of 5% in the first three quarters of 2023. Growth drivers for 2023 included information and communication, education, and financial and insurance activities, diverging from traditional sectors like mining, agriculture, and manufacturing. The earlier downward revision was primarily due to reduced copper production and declining global copper prices. Operational challenges, low ore grade in mining, low agricultural productivity, and limited manufacturing investments contributed to suppressed growth. Looking ahead to 2024, the 4.8% GDP growth target set in the 2024 National Budget, while moderate, suggests a hopeful economic outlook for Zambia (data from the Zambia Institute for Policy Analysis and Research).

According to the IMF, by the end of June, the primary fiscal surplus (cash basis) stood at ZMK 2.2 billion. Despite a mining-related revenue shortfall of 0.8% of GDP in the first half of 2023 compared to the budget, non-mining revenues, including one-offs like tax amnesty and fees from selling mobile licenses, along with controlled primary spending, have offset the deficit. As of the end of September 2023, arrears on external public and publicly guaranteed debt (both principal and interest) totaled USD 5.3 billion, marking a USD 1.2 billion increase from December 2022. This increase is exclusively linked to claims within the debt restructuring scope. All arrears owed to international financial institutions (IFIs) have been settled. Overall, the primary balance (cash basis) saw an improvement of 1.8% of GDP compared to 2022, primarily due to decreased primary spending (1.2% of GDP), including reduced investment from foreign-financed projects (0.8% of GDP) and controlled current spending (0.4% of GDP – IMF projections). In line with the 2024 draft budget, the authorities have pledged to maintain a primary balance of ZMK 5.57 billion (0.8% of GDP), accompanied by a suggested adjusted end-June Quarterly Performance Criteria (QPC) of ZMK 2.16 billion. Based on Fitch assumptions regarding debt restructuring parameters and anticipated appreciation of the kwacha post-restructuring, government debt is forecasted to decrease to 90% of GDP in 2024, down from an estimated 116% in 2023, with a further decline to 80.5% in 2025. To address refinancing and exchange rate risks, the authorities intend to raise the proportion of domestic debt in net financing from 30% to 55% by 2025, extend the maturity of local-currency debt, and rely on concessional external financing in line with the IMF's performance criterion ceiling on non-concessional borrowing. The inflation rate was estimated at 10.6% in 2023 by the IMF, well above the 6%-8% target of Bank of Zambia. The completion of the debt restructuring should enable the kwacha to appreciate in 2024 and 2025, helping inflation taper, which is forecast to decrease to 7.5% in 2025.

While Zambia achieved lower middle-income status in 2011, after a decade of strong growth, widespread and extreme rural poverty (half of Zambians still live in poverty) remains a significant problem and is compounded by a high birth rate and a relatively high burden of HIV/AIDS (one in eight Zambians has the virus). In 2023, the unemployment rate in the country was at 4.3% (World Bank), with youth unemployment being particularly high, leading more young people in Zambia to venture into businesses to counter unemployment. The country’s GDP per capita (PPP) was estimated at USD 3,975 in 2022 by the World Bank (latest data available).

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