Zambia Economic Forecast 2023
By Michelo Maunga
In beginning my forecast for the year 2023, allow me to draw your
attention to the perils of 2022. What many hoped would be the year that the
global economy arose entirely from the doldrums of COVID, presented a
successive and almost as equally disruptive shock to economies around the
world. Early in the year Putin invaded Ukraine and set in motion price hikes in
energy and food markets. And so, with this in mind, forecasters and economists
world over projected the lingering effects of this latest shock would take its
toll on the economics of 2023. Many analysts predicted an outright recession in
this year. Sentiment seems to be changing, however.
Analysts now foresee a more favourable outlook, with the envisaged “soft
landing” seemingly more tenable. A soft landing is defined as reducing runaway
inflation without causing an economic meltdown. These improving prospects are
being driven by more than one factor. The first of these is the reopening of
the Chinese economy. China and its populace have spent much of the past 3 years
under intense Zero Covid lockdowns. This has placed a drag on global growth.
Late last year, Chinese officials, abruptly abandoned this measure and in a
haste removed most restrictions. In spite of the initial surge in cases, this
act improved economic prospects. The Chinese economy is now projected to grow
at about 4.4% this year and over 5% in 2024. While this does not match the
record growth China has experienced in the past, it is above the global average
and will likely prove to be a tide that lifts all other ships, or in this case
economies. The resurgence of the Chinese economy will see increased demand in
commodity markets, such as copper, oil and other metals. This is partly the
reason why copper prices recently breached the $9,200 mark.
Secondly, the resilience of the US labour is another factor. The year
2022 saw the American federal reserve raise rates at record pace. It was
anticipated, as a consequence that that country’s unemployment figures would go
up. This has not been the case, however. Let me explain this. High interest
rates disincentivise investment at the same time stifling consumption.
Companies tend to report reduced revenues and respond by laying off workers.
Bar the technology sector, this seems not to have been the case. This tightness
has raised hopes among American analysts that the US can avoid a recession and
achieve a “soft landing”. The Fed is expected to begin by slowing its rate
hikes this year and eventually halt them altogether. The US dollar has also lost
some of the record strength that characterized its 2022. All this will conspire
to improve prospects for the rest of the world.
A similar scenario is evident in Europe. What many feared would be a
harsh winter has proved not to be so. Fears were rife, particularly in the face
of reduced gas from Russia, that a severe winter would cripple industries and
households. This winter has turned out much lighter than expected, with gas
stock sufficient.
Coming back to Zambia. I must take cognizance of the shock of 2023,
power outages. This will prove to be a risk to a positive outlook and improved
economic growth. A further risk factor are further protractions at Konkola
Copper Mines (KCM) and an inability to find an equity party at Mopani Copper
Mines. Thirdly, COVID may spiral out of control, which can also jeopardize
events. This notwithstanding I project the economy to grow by more than it did
in 2022, where it expanded by 3.1%. I do expect debt restructuring to be
finalized this year. This will bolster financial markets, including that of the
currency. I do not expect issues at the two mines to drag on further beyond
this year, with the worst-case scenario where only issues at one of them are
resolved. It appears the government and communities of the Copperbelt are
moving towards allowing Vedanta to return to KCM. The return of even KCM alone
will significantly boost copper output which may cross at least the 900k mark
as a consequence, particularly if the impasse is resolved expeditiously. I also
must allude to what I expect to be a resilient crop harvest with the favorable
rainfalls. This, however, will depend on the effect on the delay in input
distribution. Also, I anticipate the increased foreign direct investment,
government policies and greater international goodwill to reflect in a growth
rate of between 3.5%-4%. All this will be enhanced by an improved global
economic outlook.
On inflation, I expect continued downward trends. We may, however, only
reach the target band in the year 2024, of 6%-8%. The effects of the Ukraine
war seem to be dissipating in energy markets. However, the risks are tilted to
the upside with the reopening of the world’s largest oil consumer, China. This
may push up energy prices.
As I conclude, forecasts are just that, forecasts. Nothing is certain.
The situation could be better. It could be worse. However, in view of the
facts, with significant certainty I am optimistic about the year 2023. Time
will, however, be the true test.
The
Author is an Economist and member of the Economics Association of Zambia
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