World Bank revises Zambia’s recession forecast lower
According to the World Bank Global Economic Prospects reports for June 2020, Zambia’s estimated growth forecast for 2020 was revised higher to -0.8% from the -2.6% pronounced at the IMF virtual spring meetings in April earlier. This was part of a Sub Saharan Africa – SSA revision to -2.8% 580 basis points weaker than earlier forecast.
SSA economic pulse has been ravaged by the COVID19 disease pandemic leading to supply disruptions, border shut downs and health protocols that have muted economic activity as jurisdictions channel funds to public health and have to deal with budget rebalancing.
Zambia’s private sector activity has shriveled sharply to 34.3 (April) the lowest since the Purchasing Managers Index started being tracked. Its copper production levels have dwindled, while energy outlook remains bleak though offset by a bumper agriculture outlook while disease pandemic effects continue to amplify the already existing balance sheet vulnerabilities. Debt to GDP remains concerning and is widened by a weak currency while debt service continues to gobble revenues at the expense of production possibilities.
Zambia has however responded through monetary stimulus measures through ensuring markets remain liquid while it slashed its benchmark interest rate to 2012 lows of 9.25% as the fiscal side offered marginal reprieve through tax costs on medical supplies. Recently the revenue authority directed the mines to remit taxes in dollars as the Government aims to shore foreign exchange reserves to decade lows.