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Zambia Country Risk Report Q3 2019

Zambia Country Risk Report Q3 2019

Zambia's growth is likely to remain subdued relative to historic levels in the years ahead, as the government's recent struggles to rein in the country's fiscal deficits provide stronger economic headwinds. Mining sector growth will contract in 2019 due to new taxes and increased regulatory uncertainty.

We expect Zambia's overall social stability to deteriorate over the coming quarters as the government seeks to narrow the political space ahead of 2021 elec-tions. Moreover, tensions within the ruling Patriotic Front and between political parties will increase as President Edgar Lungu seeks to consolidate his position by side-lining potential rivals.

The country's fiscal deficit will narrow slightly in 2019 as revenues are boosted by higher mining receipts. That said deficits will remain large by historical standards due to expenditure growth, driven by high debt servicing costs, capital spending projects and a large public sector wage bill.

We expect that the Zambian kwacha will face continued depreciatory pressure in the short term amid poor investor confidence and falling real rates. A recent 50-basis-point rate hike by the Bank of Zambia (BoZ) will only partially temper the pace of depreciation.

We forecast that the BoZ will hold its policy rate at 10.25% in 2019. Inflationary pressures are likely to remain elevated given the pass-through effect of kwacha depreciation, but the bank will seek to balance this against efforts to provide a conducive environment for broad economic expansion.


Executive Summary
Core Views
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Headwinds To Growth Amid Mining, Agriculture Slowdown
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
External Trade And Investment Outlook
Current Account Deficit To Widen Amid Weak Outlook For Exports
Outlook On External Position
TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
TABLE: TOP 5 GOODS IMPORTS IN 2017
TABLE: TOP 5 GOODS EXPORTS IN 2017
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Monetary Policy
Bank Of Zambia To Keep Rates Unchanged In 2019, But Upside Risks Persist
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
Zambia To Make Little Progress On Fiscal Consolidation In 2019-2020
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES (2017)
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Currency Forecast
ZMW: Zambian Kwacha To Remain On Steady Depreciatory Trend
Zambia Country Risk Q3 2019THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report is solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.Contents10-Year Forecast
The Zambian Economy To 2028
Mines Both A Driver Of And Risk To Growth
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Political Outlook
Domestic Politics
Political Outlook To Weaken Ahead Of 2021 Elections
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Erosion Of Democracy Presents Potential Threat To Long-Term Stability
Operational Risk
TABLE: OPERATIONAL RISK
Business Crime
TABLE: BUSINESS RESPONSE TO WHITE COLLAR CRIME AND ORGANISED CRIME
Education
Global Macro Outlook
TABLE: GLOBAL MACROECONOMIC FORECASTS (2018-2023)
TABLE: DEVELOPED MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % Y-O-Y
Index Tables
TABLE: ZAMBIA – MACROECONOMIC DATA & FORECASTS

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