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Zambia Country Risk Report Q2 2015

Zambia Country Risk Report Q2 2015

Core Views

Zambia's new president Edgar Lungu faces immediate challengesstemming from the narrowness of his election victory, internal schismswithin his Patriotic Front (PF) party, and the sharp depreciation ofthe kwacha since December.

Domestic demand driven by private consumption will be the engineof the Zambian economy in 2015. Low copper prices and policyuncertainty will weigh on the export sector, while a weakening currencypresents further downside risks. As such, we have revisedour 2015 real GDP growth forecast to 5.5%, considerably lower thanour previous forecast of 7.0%.

Zambia's current account will fall deeper in deficit in 2015 and remainin the red in 2016 due in part to falling copper prices and subduedcopper production growth. Foreign direct inflows will prevent a balanceof payments crisis.

Major Forecast Changes

2015 real GDP growth forecast revised down to 5.6%, from 7.0%last quarter.


Executive Summary
Core Views
Major Forecast Changes
Key Risks To Outlook
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
New President Faces Immediate Tests, As 2016 Elections Loom
Zambia's new president Edgar Lungu faces immediate challenges stemming from the narrowness of his election victory, internal
schisms within his Patriotic Front (PF) party, and the sharp depreciation of the kwacha since December.
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 Activity
Domestic Demand Will Partly Offset Copper Woes
Domestic demand driven by private consumption will be the engine of the Zambian economy in 2015. Low copper prices and policy
uncertainty will weigh on the export sector, while a weakening currency presents further downside risks.
Table: Economic Activity
Monetary Policy
Monetary Policy Set To Loosen Under New Central Bank Governor
Monetary policy will loosen in 2015 and 2016 as imported inflationary pressures diminish. After some 275 basis points of rises in 2014,
we forecast that the Bank of Zambia will reduce the policy rate to 11.00% by end-2015.
Table: Monetary Policy
Fiscal Policy
Recurrent Spending Pressures Will Weigh On Fiscal Balance
Zambia's fiscal deficit will be equivalent to 7.1% of GDP in 2015. Recurrent spending will remain high as 2016 elections approach, while
revenues will be constrained by low copper prices, lacklustre investment and an inefficient tax collection system.
TABLE: Fiscal Policy
Balance Of Payments
Copper Prices To Tip Current Account Further Into Deficit
Zambia's current account will fall deeper in deficit in 2015 and remain in the red in 2016 due in part to falling copper prices and subdued
copper production growth. Foreign direct investment inflows will prevent a balance of payments crisis.
Table: Current Account
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 project ing average annual growth of
6.7 % over our forecast period to 2024. Buoying this strong performance will be a strengthening private sector, as well as ongoing
investment in mining, agriculture and infrastructure, aided by a favourable business environment.
Table: Macroeconomic Indicators
Chapter 4: Operational Risk
SWOT Analysis
Operational Risk Index
Operational Risk
Table: Operational Risk
Availability of Labour
Table : Sub -Sahara n Africa – Availabilit y Of Labour
Table: Top Ten Source Countries For Migrant Workers
Crime Risk
Table : Sub -Sahara n Africa – Crime Ris k
Table: Crime Statistics
Chapter 5: Key Sectors
Infrastructure
Table: Construction And Infrastructure Industry Data
Table: Construction And Infrastructure Industry Data
Other Key Sectors
Table : Pharma Sector Ke y Indicators
Table: Telecoms Sector Key Indicators
Chapter 6: BMI Global Macro Outlook
Global Outlook
Deflationary Pressure
Table: Global Assumptions
Table : Developed States , Real GDP Growt H, %
Table : BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
Table : Emergi ng Mar kets , Real GDP Growth , %

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