Country Report Zambia April 2010

Outlook for 2010-11: External sector

Copper export levels are expected to rise in 2010-11 in line with the increase in global copper prices. Growth in non-traditional exports will be more fragile owing to the stuttering global recovery. Imports will increase strongly as domestic demand picks up, particularly from the copper sector, and as international prices rebound after the falls seen in 2009. However, the expected increase in imports will not be enough to stop the overall trade surplus from growing in 2010 and remaining substantial in 2011.

The improvement in the trade account will marginally exceed the deterioration in the invisibles deficit. Debits from trade and mining-related services will outpace tourism growth, while income outflows will increase as profit remittances from the mining sector recover. Transfer inflows will also fall back as relations between the government and donors deteriorate. The recovery in worker remittances will only partially offset this. Overall, the deterioration in the invisibles account will not be enough to fully offset the increase in the trade surplus in 2010, with the current-account deficit expected to fall to 0.3% of GDP. However, in 2011, when copper prices stabilise and imports of goods and services continue to grow, the current-account deficit is forecast to increase slightly, to 1% of GDP.

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