Zambia Economic Outlook
- Zambia is facing its worst economic crisis in more than ten years, with falling copper prices, pressure on the government’s operating and investment budget, and electricity-supply shortages affecting the real economy.
- For Zambia’s national elections in 2016, the Constitutional Amendment Act has set the date at 11 August and introduced a 50% +1 requirement for winning the election, as well as a presidential running mate.
- In 2015, urban growth continued at an estimated rate of 42% as people moved to towns in search of jobs and opportunities.
In 2015, the Zambian economy faced economic headwinds initially due to fast rising expenditures and a fiscal deficit that more than doubled in 2013. Slowing demand from China had reduced copper prices to their lowest level in more than seven years. The situation was exacerbated by low agriculture output and a growing electricity crisis. Real economic growth fell to its lowest in 15 years, with gross domestic product (GDP) growth estimated to have slowed to 3.7% from 5.0% in 2014. Maize output declined by 22% due to poor rains. Copper prices declined by 28% while mining output remained roughly the same as in 2014. Slow economic growth is projected for the medium term as the electricity-supply deficit continues and Zambia continues to import electricity from neighbouring countries. The 2016 agricultural season is expected to slow following El Niño weather effects. In addition, elections planned for 2016 will add pressure to public spending. Copper prices are expected to remain flat as world copper supply is sufficient to meet global demand.
The electricity-supply deficit, which began in June 2015, has affected manufacturing and other businesses. It is estimated at 40-50% of baseload, necessitating considerable daily load shedding. This has increased operating costs as firms have had to invest in diesel generators, and the increase in costs has been passed on to consumers. Combined with waning confidence in the economy, the Zambia kwacha (ZMW) depreciated by 42% against the United States dollar (USD), raising end-of-year inflation to 21%. The slowdown in the economy led to more than 9 000 job losses in the formal private sector.
In 2010, 60% of Zambians were living in rural areas. Official projections show that urbanisation will have risen to 45% by 2025. The greatest contributors to the country’s domestic product are the capital city, Lusaka, and other major mining towns. Urbanisation is both a result of natural population growth and rural-to-urban migration.