Business

‘Zambia’s economy on course’

KABANDA CHULU, Lusaka
THE World Bank has projected a steady rise in the gross domestic product (GDP) of Zambia on the assumption that new power generation capacity comes on board and a better harvest is achieved.
The bank anticipates that Zambia’s GDP, which is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, will remain close to three percent in 2016 before improving to 4.2 percent in 2017 and five percent in 2018.
It also stated that improved economic growth may be achieved if global copper supply matches demand to result in good prices. Currently, the price of copper is below US$4,700 per tonne.
According to a mid-year economic brief compiled by the World Bank, that the outlook for the Zambian economy is underpinned by five assumptions.
“The impact of the power crisis is less severe than in 2015 as new generation capacity comes on stream. The 2015-16 harvest is better than in 2014-15 and confidence in the economy will be improved once an agreement with International Monetary Fund is reached.
“An IMF programme will help restore investor confidence, and if credible budget policies are put in place to address growing fiscal deficits,” it stated.
However, the report notes that the outlook is subject to both domestic and external downside risks.
“Externally, lower than predicted output growth in China will weigh on the demand for Zambia’s exports, and reduced copper prices will severely affect Zambia’s prospects. Strengthening of the US dollar in the event of an increase in interest rates by the Federal Reserve will also likely lead to further volatility of the Kwacha and depreciation pressures,” it states.
On the domestic front, it observes that the risks will be high if the power crisis does not decrease and continues into 2017.
“This can occur through delays in new generation coming fully on stream or a slower than expected recovery of generation capacity at the main hydro-power plants. Government should also implement a fiscal adjustment, and without it, exchange rate uncertainty will continue to be a threat to inflation and reduce economic growth in 2016 and 2017,” it states.

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