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Zambia Country Risk Report Q1 2016

Zambia Country Risk Report Q1 2016

Core Views

The Zambian economy will record another year of slow growth in 2016, as the currency collapse seen in 2015 following falling copper prices has diminished the production incentive for import dependent producers. The government's plans to boost spending will offer little support.

The collapse of the Zambian currency and subsequent rise in inflation will force the Bank of Zambia's Monetary Policy Committee to raise the key policy rate at their next meeting. However, a rate hike will do little to stabilise the currency and stem inflation without direct intervention in the currency market.

Zambia's budget deficit will see a marginal improvement in 2016 as the government makes efforts to improve domestic revenue collection. While this marks an upward revision to our expectations for the country's budget balance, the government will still fall short of its aim to halve the deficit to 3.8% of GDP due to overambitious targets and a challenging macro-economic environment.

Hakainde Hichilema will win the 2016 presidential election in Zambia following the collapse of the country's currency and worsening macroeconomic picture.

The Zambian kwacha will continue its trend of depreciation in 2016 on the basis of a weak outlook for the country's copper industry. The lack of a stronger reserve arsenal means the central bank will have little in the way of ammunition to halt an expected 21.6% fall in the currency's value by year-end 2016.


Executive Summary
Core Views
Key Risks
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Political Outlook
Hichilema Only Winner From Economic Turmoil
Hakainde Hichilema will win the 2016 presidential election in Zambia following the collapse of the country's currency and worsening
macroeconomic picture.
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
A Question Of Policy, Not Politics
Zambia boasts a competitive political environment that has been characterised by closely contested and increasingly freer and fairer
elections (according to observers). However, issues such as corruption and income inequality will require redress over the coming
decade, in order to keep Zambia on a progressive political and economic growth trajectory.
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Copper Dependence Hits Home As Economy Struggles Through 2016
The Zambian economy will record another year of slow growth in 2016, as the currency collapse seen in 2015 following falling copper
prices has diminished the production incentive for import dependent producers.
GDP By Expenditure Outlook
TABLE: 10-YEAR GDP FORECAST
External Trade And Investment Outlook
C/A Deficit Lasts On Slow Export Recovery
Zambia's current account balance will remain in a deficit until 2019 as a steep decline in copper production has compounded a gradual
fall in the metal's price.
Fiscal Policy And Public Debt Outlook
Government Sets Itself Up For Fall With Overambitious Budget
Zambia's budget deficit will see a marginal improvement in 2016 as the government makes efforts to improve domestic revenue
collection.
Monetary Policy
Currency Collapse Will Force Rate Hike
The collapse of the Zambian currency and subsequent rise in inflation will force the Bank of Zambia's Monetary Policy Committee to
raise the key policy rate at their next meeting. However, a rate hike will do little to stabilise the currency and stem inflation without direct
intervention in the currency market.
Chapter 3: 10-Year Forecast
The Zambian Economy To 2024
Mines Both A Driver Of And Risk To Growth
On the back of an improving regional outlook and good prospects for the mining sector, we are projecting average annual growth of
6.1% over our forecast period to 2024.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 4: Operational Risk
SWOT Analysis
Operational Risk Index
Operational Risk
TABLE: OPERATIONAL RISK
Education
TABLE: SUB-SAHARAN AFRICA - EDUCATION RISK
Government Intervention
TABLE: SUB-SAHARAN AFRICA - GOVERNMENT INTERVENTION RISK
TABLE: PERSONAL INCOME TAX RATE
Chapter 5: BMI Global Macro Outlook
Global Outlook
Exit The Dragon
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %

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