Analysis by Region - Emerging Markets - Zambia
The passthrough effects of the Russia-Ukraine war on Zambia should transmit primarily through the terms-of-trade mechanism, considering the limited direct trade ties between the Southern African nation and the Black Sea countries. The energy price disruption has already started to filter through to the real economy, as Zambia executed a sizeable pump price adjustment at end-March. Notwithstanding a partial overturn of steep pump price adjustments merely a month later, higher input costs will curb private sector and household consumption expenditure in coming months. In turn, fiscal austerity limits any potential countercyclical support from public expenditure. The growth baton has now been passed to private fixed investment, as market-friendly policy revisions unlocked expansion projects in the mining sector.
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