Zambia Economic Outlook
- Growth in real GDP accelerated to 7.3% in 2012 from 6.8% recorded in 2011 while inflation declined to an annual average of 6.5% in 2012 from 8.7% in 2011. In the next two years, growth is expected to remain strong and inflation low.
- Zambia’s economic and governance landscape is improving though challenges remain. The country moved up two places on the Mo Ibrahim Index of African Governance in 2012 but fell 10 places in the latest World Bank report Doing Business where it now ranks 94th out of 185 countries.
- Despite marked improvements in economic performance, Zambia has yet to achieve significant gains in social and human development. The poverty headcount remains high, with about 60% of the population still living below the poverty line.
Zambia’s economy extended its growth momentum in 2012. Growth was driven by expansion in agriculture, construction, manufacturing, transport and finance. Economic prospects for the future appear bright if growth can be sustained and broadened to accelerate job creation and poverty reduction. After a successive slump in output, copper mining is expected to rebound in 2013, and is projected to reach 1.5 million tonnes by 2015. This is largely due to investment in new mines and the expansion of capacity at existing plants. Robust international copper prices will provide additional stimulus to mining.
Growth in other sectors is expected to remain equally robust, supported by infrastructure development and improvements in the business environment. In the agriculture sector, the government’s input subsidy to smallholder farmers will continue while growth in construction and transport will benefit from the government’s Link 8000 road infrastructure project. Expansion in energy infrastructure, a boost in the services sector from rising urban incomes and improvements in the regulatory environment will further strengthen Zambia’s medium-term growth.
However, Zambia’s growth will remain redundant unless there is a corresponding increase in job creation and progress on poverty reduction, and further progress in tackling the HIV/AIDS pandemic. Zambia’s natural resources have not been harnessed to foster structural transformation and inclusive job creation. The country is dependent on copper mining, which accounts for about 80% of foreign exchange earnings and only 6% of total revenues. Thus, Zambia’s long-term economic prospects hinge on the prudent capture and deployment of copper revenues as well as harnessing the potential of noncopper minerals and other natural resources. Ultimately, manufacturing activity, driven by the private sector, and directly or indirectly linked to these natural resources, will be critical to the country’s long-term prosperity.