Zambia Country Risk Report Q4 2020
We expect that Zambia's economy will enter its first full-year recession since 1998 in 2020 due to the Covid-19 pandemic. Lower global demand for travel will depress tourist arrivals, while domestic restrictions and contagion fears will weaken consumer sentiment and private investment.
We forecast that the Bank of Zambia will lower the policy rate by a further 50 basis points (bps) by the end of 2020, after cuts worth 350bps between May and August, in an effort to support domestic lending and economic activity.
Meanwhile, weaker investor confidence in the country's deteriorating fiscal outlook, as well as stabilising copper prices, will see the kwacha facing further downward pressure in the short term, before paring back some of its losses in 2021.
That said, we expect that imports will continue to lag behind exports in 2020, as domestic demand weakens, contributing to a wider current account surplus, before small deficits become the norm from 2021.
Lastly, there will be an elevated risk of social unrest given public anger at high unemployment and increasing government efforts to narrow the political space ahead of the 2021 elections.
The economy remains closely tied to agriculture, and weather poses substantial risks, as illustrated by severe drought conditions over 2019. The persistence of drought beyond 2019 could pose significant downside risks to our growth forecast.
Zambia's economy also relies extensively on its copper mining industry, which keeps it vulnerable to volatility in global demand and prices.
The kwacha remains highly vulnerable to major sell-offs as the government shows limited progress on fiscal consolidation. Greater-than-anticipated currency depreciation would pose upside risk to inflation, further weakening the economic outlook.
- Executive Summary
- Core Views
- Key Risks
- Country Risk Summary
- Economic Risk Index
- Political Risk Index
- Economic – SWOT Analysis
- Political – SWOT Analysis
- Economic Outlook
- Economic Growth Outlook
- Economy Set For Moderate Recovery After 2020 Recession
- 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
- Wider Current Account Surplus In 2020, Small Deficits Thereafter
- Outlook On External Position
- TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
- TABLE: TOP FIVE GOODS IMPORTS, 2018
- TABLE: TOP FIVE GOODS EXPORTS, 2018
- TABLE: CURRENT ACCOUNT BALANCE FORECASTS
- Monetary Policy
- Bank Of Zambia To Cut Policy Rate Further In 2020, Hold In 2021
- Monetary Policy Framework
- TABLE: MONETARY POLICY FORECASTS
- Structural Fiscal Position
- TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES (2019 PRELIMINARY)
- TABLE: FISCAL AND PUBLIC DEBT FORECASTS
- Currency Forecast
- Fiscal Risks To Keep Kwacha Weak Over Coming Quarters
- TABLE: CURRENCY FORECAST
- THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings’ Credit Ratings. Any comments or data included in the report are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.Zambia Country Risk Q4 2020Contents10-Year Forecast
- The Zambian Economy To 2029
- Copper Mining To Provide Less Support To Economic Growth
- TABLE: LONG-TERM MACROECONOMIC FORECASTS
- Political Outlook
- Domestic Politics
- Ruling Party Likely To Win 2021 Election, But Social Stability At Stake
- TABLE: POLITICAL OVERVIEW
- Long-Term Political Outlook
- Erosion Of Democracy Presents Potential Threat To Long-Term Stability
- Operational Risk
- TABLE: OPERATIONAL RISK
- Labour Costs
- TABLE: LABOUR REGULATIONS GOVERNING FLEXIBILITY OF WORKFORCE
- Legal Environment
- TABLE: BUREAUCRATIC PROCEDURES AND BARRIERS
- Global Macro Outlook
- Recovery Taking Shape, But Headwinds Remain
- TABLE: GLOBAL MACROECONOMIC FORECASTS (2019-2024)
- TABLE: DEVELOPED MARKETS – REAL GDP GROWTH, % y-o-y
- TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
- Index Tables
- TABLE: ZAMBIA – MACROECONOMIC DATA AND FORECASTS