Macro Forum: The Street View




The economy experienced a slight uptick in activity, growing at 3.9% year-on-year in Q2 2018 compared to 3.4% in the comparable period in 2017. The Financial and Insurance and Information and Communication sectors showed healthy expansions of 35% and 23% respectively. The economy grew 3.3% in the first half of 2018 compared to 3.1% in the first half of 2017. However, headwinds are anticipated in the form of drought, with dry weather patterns being experienced in Southern Africa. In addition, the mining sector, which was the largest contributor to growth in H1 2018, is coming under pressure due to weaker copper prices driven by slowing Chinese demand. GDP is forecast at 3.4% and 3.7% in 2018 and 2019 respectively.

Inflation rose slightly in December to 7.9% year-on-year from 7.8% the previous month due in part to the transport sub-index accelerating on a year-on-year basis from 14.9% in November to 16.5% in December. Food inflation was a mitigating factor slowing from 8.4% year-on-year to 8.1% year-on-year. The lower oil price will counter inflationary pressure going forward offset by the impact of an undervalued currency.. Inflation is forecast at 7.7% 2018 and 8.7% in 2019. The Monetary Policy Committee maintained the benchmark interest rate at 9.75% taking into consideration the poor growth environment, continuing negative business sentiment and deteriorating inflation rate.

Zambia’s fiscal position remains fragile with the fiscal deficit for 2018 expected to be 8.1% of GDP. The government has shown a lack of commitment to cut spending and the 2019 budget is unrealistic. Failure to reach definitive conclusion on support from the IMF following the organisation’s visit in November 2018 increases debt sustainability concerns.

The currency stabilised in October, however, the kwacha remains fragile and at risk due to weaker global factors in addition to the twin deficits and poor performance on policy reform. The ZMW appreciated by 3.6% over the quarter ending on ZMW11.88 from ZMW12.31 to the USD at the start of the quarter.


Zambia remains a challenging economy to invest in, there has been limited international expansion and new investment as a result of the challenging macroeconomic landscape, however there are smaller scale opportunities with local Zambian businesses. 




Real GDP Growth

Source: International Monetary Fund

Zambia FX vs FV

Source: Bloomberg and Actis methodology for Fundamental Value


Source: International Monetary Fund


David Cooke

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Edgar Lungu
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