The Zambia National Commercial Bank – ZANACO has projected that the country’s economic growth rate will slow down in the years 2019 and 2020 due to various factors among them poor rainfall pattern experienced in the southern part of the country.
The commercial Banks Global Economic Review and outlook report for the month of March 2019 made available to the Zambia Business Times -ZBT has indicated that poor rainfall pattern will negatively impact growth through reduced crop yield in 2018/2019 season as well as reduced power production at Zambia’s hydro power plants.
It is expected that faster dwindling water levels at Kariba dam, Zambia’s largest water reservoir, will limit the country’s ability to generate adequate power to meet its needs.
Consequently, Zanaco anticipates that Zambia’s utility operator ZESCO will start rationing power supply thereby adversely impacting economic activity. For example, water levels at Kariba dam are now 35% full compared to 61% full during the same period in 2018
The Zambian economy will also grow by 3.4% in 2019 and 3.6% in 2020, 0.8% and 0.7% lower than our earlier projections.
However, the fiscal challenges facing the government as debt service obligations mount will continue to exert pressure on the government to cut expenditure on key sectors which is likely to hurt economic growth.
High frequency data has also suggested that domestic economic activity returned to its now familiar territory in March 2019 after posting gains in February 2019, thereby ending Q1 2019 on a subdued note.
The Stanbic Markit PMI, a measure of private economic activity dipped below the benchmark of 50 falling by 4.6% to 48.1 in March from 50.4 in February 2019. The deterioration in economic activity is attributed to decreased demand for goods and services as slowing economic activity starts affecting household and business incomes.
