Economic growth forecast lowered to 5%

DATA from Zambia’s ministry of finance shows that the government has revised its real gross domestic product (GDP) growth forecast for this year from 5.8 percent at the mid-term budget review to 5 percent. The government initially projected economic growth to average 7 percent this year, according to the budget speech delivered last October, analysts at NKC African Economics noted.

Moody’s furthermore warned that the loss of production stemming from the mining operation suspensions could add a further 0.75 percentage points to 1 percentage points of GDP to the fiscal deficit due to the shrinking tax base. The government’s official projection is for the fiscal deficit to equate to 6.7 percent of GDP this year.

“We concur with Moody’s that the latest developments in the mining sector will have farreaching consequences. Our forecasts suggest that Zambia will undershoot the government’s revised target of 5 percent economic growth this year,” NKC African Economics analyst Irmgard Erasmus said.

“The government’s attitude towards foreign investors could very well deter future foreign direct investment, and could systemically undercut potential revenue sources to the detriment of the fiscus. The government’s reaction to the mining suspension announcements is hardly surprising, and an alltoo-familiar bitter taste in the mouth for foreign investors,” she added.

She said that while she had previously said the business climate would better under President Edgar Lungu’s administration, the government’s stance suggested little had changed. – Staff Reporter