Economic Profile
After decades of systematic stagnation and economic decline, Zambia experienced a phase of economic growth from 2000 to 2018. In 2019, however, this growth slowed down for the following reasons: the poor rainy season and the consequent drought, coupled with the serious energy crisis that heavily penalized the productivity sectors (mining, industrial and agricultural), as well as the strong depreciation of the local currency (over 10%) and high inflation (9%). Economic expansion continues to be supported by the copper mining sector which, thanks to the high international prices, continues to have stimulating effects on other sectors of the economy and which still represents 70% of Zambian exports. In particular, positive effects were registered by the constructin sector, with a consistent growth following an increase in the demand for residential houses and by civil works aimed at modernizing and improve instructructure in the country (mainly roads and airports). However, the ambitious infrastructure program has led the country to over-indebtedness, an issue that causes considerable international concern
Debt sustainability is an objective pursued by the government, as it relaunched its dialogue with the IMF. Furthermore, in less than two years, Zambia will have to start repaying the three Eurobonds signed by the Government: the first of 750 million dollars (issued in September 2012) will expire in 2022, the second of 1 billion dollars (taken up in April 2014) in 2024 and the last of 1.25 billion dollars (signed in July 2015) will have to be repaid in installments between 2025 and 2027 (overall, this is 3 billion dollars by 2027). According to the 2020 budget presented to Parliament by the Minister of Finance, the intention to set aside funds of approximately USD 47.7 million for the progressive repayment of the Eurobonds was accepted.
According to official sources, GDP growth for the next five years is expected to be around 2.5% annually; growth is expected to settle at 2% in 2019. A rise is expected from next year in anticipation of the high price of copper on international markets and an expected normalization of the energy crisis. The inflation rate is expected to fluctuate between 6 and 8% during the same period, although in 2019 it is recording an average of 9%. Zambia's 2018 GDP is approximately USD 26.7 billion. The Zambian Kwacha suffered a depreciation of 9.4% against the US dollar. While external debt at the end of June 2019 was USD 10.23 billion.
The 2020 budget aims at stimulating domestic economy in order to reduce the deficit. The macroeconomic targets for 2020 concern the achievement of real GDP growth of at least 3%; keeping the inflation rate between 6 and 8%; reducing the fiscal deficit by 5.5% of GDP and finally increasing the mobilization of internal revenue by at least 22% of GDP.
However, all forecasts will need to be reviewed in light of the inevitable impact of the global COVID-19 crisis.
The Zambian Government attaches particular importance to development driven by the private sector and to foreign investment in the context of a strategy aimed at economic diversification, reducing dependence on the copper sector, trusting that diversification and job creation can be achieved through public and private investments (PPP) in the agricultural, tourism, energy, manufacturing and mining sectors.
Italian companies in Zambia
Italian companies currently operating in Zambia include Enel Green Power, which has built a photovoltaic system (34MW) outside Lusaka under the "Scaling Solar" project financed by the World Bank; Building Energy which won 2 lots of the GetFit program, funded by KfW, for the construction of a 40 MW photovoltaic system near the city of Kabwe; SARI; Team Engineering and Technital consultancy firms. The family businesses created and managed by Italian nationals residing in Zambia are very active.
Istituto per il Commercio Estero (ICE)-(Italian Trade Agency)
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Tel.: +27.011.880.8383
Fax: +27.011.880.9040/1
E-mail: johannesburg@ice.it
Web site: https://www.ice.it/en/markets/south-africa/johannesburg
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