Zambia’s economy has had a slow recovery from the shock caused by the COVID-19 pandemic. Real GDP growth is projected to increase from an annual average of 1.0% for 2019 to 2021, to 3.1% in 2022. Inflation is projected to increase from an annual average of 15.1% for 2019 to 2021, to 15.7% in 2022. The elevated inflation is caused by historically depressed copper prices that led to depreciation of the ZMW and most recently the sanctions against Russia which have increased the price of crucial imports. In the medium-term period from 2023 to 2025, real GDP growth is projected to increase to an annual average of 3.9%. Meanwhile, inflation is projected to decrease to an average of 8.2% over the medium-term from 2023 to 2025.
The Government of Zambia’s debt has begun moderating after increasing in 2020. Zambia’s gross public debt is projected to decrease from an annual average of 121.0% of GDP for 2019 to 2021, to 106.8% of GDP in 2022. The decrease in public debt is largely due to the Government of Zambia receiving structural debt relief and implementing countercyclical fiscal austerity as the economy recovers from the shock caused by the global lockdown response to the COVID-19 pandemic. The fiscal deficit is projected to narrow from an annual average of -10.6% of GDP for 2019 to 2021, to -9.0% in 2022. This shows the countercyclical fiscal stance taken by the government despite spending and further borrowing outpace revenue growth. In the medium-term period from 2023 to 2025, the fiscal deficit is projected to narrow to an annual average of -5.7% of GDP. Therefore, public debt is projected to increase to an average of 109.0% of GDP over the medium-term from 2023 to 2025.
Zambia’s external sector was not negatively affected by the COVID-19 pandemic in 2020 and the sector is projected to remain stable due to the rebound in commodity prices, even though this has improved the ZMW exchange rate and increased demand for imports. Zambia’s current account surplus is projected to narrow in relative terms from an annual average of USD 1.2 billion (approx. 6.4% of GDP) for 2019 to 2021, to USD 1.2 billion (approx. 4.4% of GDP) in 2022. In the medium-term period from 2023 to 2025, the current account surplus is projected to remain stable at an annual average of USD 1.2 billion (approx. 4.0% of GDP). This illustrates a continuous stability in the current account balance due to the current rebound in commodity prices which is primarily driven by the impact of sanctions against Russia. Therefore, Zambian authorities will have to take advantage of the current reprieve and invest in further diversification of the country’s exports away from the continued reliance on copper.
Zambia is scheduled to hold its national elections in 2026 and the election campaigning cycle is still a long way ahead. Incumbent President H.E. Hakainde Hichilema has just begun his first term and will most likely be vying for a second term in office using his economic recovery and anti-corruption rhetoric. The current political climate remains relatively calm despite economic pressure for tangible results to President Hichilema’s promises of economic recovery. President H.E. Hakainde Hichilema will his work cut out given the current public debt crisis and his anti-corruption promise to deal with malfeasance. The domestic economic recovery remains the central aim in Zambia in addition to regional priorities as a member of SADC and the host of COMESA.
