Country Report Zambia April 2010

Outlook for 2010-11: Economic growth

The recovery of the economically vital copper sector since the crash in prices during the second half of 2008 has been impressive. Strong growth in the mining sector, coupled with robust agricultural production and increased construction activity, contributed to real GDP growth estimated by the Zambian authorities at 6.3% in 2009. This is expected to continue into 2010, as increasing copper prices will encourage further mining-related investment and substantial increases in production. However, a limiting factor will be power supply, which will remain tight throughout the forecast period. In addition, the recovery in mining-related services will be slow, as mine owners will remain wary of overheads after major efforts to reduce costs in 2009. Agricultural production, especially of the key foodstuff, maize, looks set to be strong in 2010-11 as government efforts to assist the sector continue to yield results. Nevertheless, production growth may slow in 2010, as some farmers were put off by difficulties in getting their harvest to market in 2009. Tourism will receive a boost in 2010 from the football World Cup being held in South Africa, with visitor numbers to the Victoria Falls in particular expected to increase. However, manufacturing, other than copper refining, will remain moribund owing to poor infrastructure and cheap Asian imports. Real GDP growth is therefore forecast to increase to 6.8% in 2010, before dipping slightly to 6.4% in 2011 as growth in the mining sector eases after a number of boom years. Political uncertainly related to the 2011 elections, as well as a stutter in global prospects, could also damage confidence.

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