Economic Growth and Development in Zambia
Key Macro Data (2015 or latest)
Background Information
Latest annual GDP
Growth (%)
Currency unit
Kwacha
Exchange rate system
Managed
floating
Policy interest rate
19%
3.0%
(7% target)
Aspects of Development
Latest HDI ranking
139/188
Income inequality HDI
adjustment
HDI score
falls 34%
GDP or GNI per capita
(US $, at PPP)
$3734
Inflation (%)
12% (rising)
Member of a Regional
Trade Agreement
SADC and
COMESA
Gender inequality HDI
ranking
132/155
Unemployment rate
(% of labour force)
13%
Current account
balance (% of GDP)
-6%
% of population living in
extreme poverty
74%
Fiscal balance
(% of GDP)
-7%
Main corporate tax rate
(Per Cent)
35%
Life Expectancy at birth
(years)
60 years
Govt debt (% of GDP)
60%
Competitiveness rank
96/144
Gini coefficient (Latest
published estimate)
0.57
Corruption Perception
Ranking
85/185
Inward FDI (% of GDP)
5-6%
Yield on 10-Yr Govt
Bonds (Per Cent)
9% yield on
Euro Bond
Investment
(% of GDP)
32%
Ease of Doing Business
Ranking
111/189
Remittances (% of GDP)
n/a
Gross national savings
(% of GDP)
31%
External Debt
(% of GDP)
38%
Aid (% of GDP)
< 5% of
GDP
Contextual Background on the Zambian Economy
Economic Structure
Development and Growth Issues / Policies
Share of GDP by value added (% of GDP)
3 factors limiting development progress
Primary: 9
1/ Landlocked with poor infrastructure
Industrial: 32
2/ Very high extreme poverty & inequality
Services: 59
3/ Low productivity subsistence farming
Main export industries (+ major firms)
4/ 80% of people are in vulnerable employment
1/ Raw and refined copper
3 policies used to improve the supply-side
2/ Sugar
1/ Creation of 2 Special Economic Zones
3/ Cobalt
2/ Reduce the complex system of farm subsidies
Key risks to sustainable growth
3/ Incentives to grow mobile banking services
1/ Falling terms of trade as copper prices fall
Long term challenges facing this country
2/ Closure of copper mines / rising unemployment
Challenge 1: Improve level of human capital to
help make growth more inclusive / sustainable
3/ Huge infrastructural deficit, especially in
transportation and energy (power shortages)
4/ Twin deficit – rising fiscal and current account
deficit as export revenues fall
Challenge 2: Diversify out of copper mining
Challenge 3: Increase government revenue and
reduce scale of distortionary state subsidies
Evaluating Main Strengths and Weaknesses for Zambia
Competitive Strengths
Main Weaknesses in their Economy
1/ Rich natural factor endowment (copper & emeralds)
1/ Vulnerable to global slowdown / Zambia does not
have a stabilisation fund / wealth fund to draw upon
2/ Young workforce (half pop are under 15yrs old)
3/ Now a middle income country – GNI per capita
increased by about 69% between 1980 and 2014.
4/ Progress in improving health outcomes /HDI rank is
higher than average for Sub Saharan Africa
5/ Functioning democracy with political stability
Other Notes
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Zambia has become a favoured venue for inward
investment worth 5-6% of GDP annually with much
coming from China.
Country still has strong long-run growth potential
given it’s natural resource endowment
Zambia has a functioning democracy but economic
management is weak and Zambia has not successfully
used revenues from copper mining/exporting into
establishing a diversified industrial base –
manufacturing is shrinking as % of GDP
Can Zambia survive what many believe to be the end
of the global commodity super price cycle?
2/ High secondary school drop-out ratio – disparity
between expected and mean years of schooling
3/ Low tax revenues / big tax avoidance issues
4/ Weak currency / growing fiscal & BoP deficits
5/ Finance is under-developed / very high interest rates
of 30-40% for small businesses / farmers
Other Useful Contextual Knowledge
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40% child labour (14% in developing countries)
Zambia is too dependent on hydro-electricity – much
goes to power the copper mines. Drought is leading
to power shortages and affecting farming
The big threat facing Zambia is stagflation i.e. a sharp
reduction in economic growth accompanied to
double-digit rates of inflation fuelled by a severe
depreciation of the currency.
Youth under employment is also a huge issue
Zambia’s economic growth has not translated into
significant poverty reduction