1. Economic Growth and Development in Zambia
Key Macro Data (2015 or latest)
Latest annual GDP Growth (%)
3.0%
(7% target)
GDP or GNI per capita
(US $, at PPP)
$3734
Inflation (%)
12% (rising)
Unemployment rate
(% of labour force)
13%
Fiscal balance
(% of GDP)
-7%
Govt debt (% of GDP)
60%
Yield on 10-Yr Govt Bonds (Per Cent)
9% yield on Euro Bond
Investment
32%
Gross national savings (% of GDP)
31%
Background Information
Currency unit
Kwacha
Exchange rate system
Managed floating
Policy interest rate
19%
Member of a Regional Trade Agreement
SADC and COMESA
Current account balance (% of GDP)
-6%
Main corporate tax rate (Per Cent)
35%
Competitiveness rank
96/144
Corruption Perception Ranking
85/185
Ease of Doing Business Ranking
111/189
External Debt
(% of GDP)
38%
Aspects of Development
Latest HDI ranking
139/188
Income inequality HDI adjustment
HDI score falls 34%
Gender inequality HDI ranking
132/155
% of population living in extreme poverty
74%
Life Expectancy at birth (years)
60 years
Gini coefficient (Latest published estimate)
0.57
Inward FDI (% of GDP)
5-6%
Remittances (% of GDP)
n/a
Aid (% of GDP)
< 5% of GDP

2. Contextual Background on the Zambian Economy
Economic Structure
Share of GDP by value added (% of GDP)
Primary: 9
Industrial: 32
Services: 59
Main export industries (+ major firms)
1/ Raw and refined copper
2/ Sugar
3/ Cobalt
Key risks to sustainable growth
1/ Falling terms of trade as copper prices fall
2/ Closure of copper mines / rising unemployment
3/ Huge infrastructural deficit, especially in transportation and energy (power shortages)
4/ Twin deficit – rising fiscal and current account deficit as export revenues fall
Development and Growth Issues / Policies
3 factors limiting development progress
1/ Landlocked with poor infrastructure
2/ Very high extreme poverty & inequality
3/ Low productivity subsistence farming
4/ 80% of people are in vulnerable employment
3 policies used to improve the supply-side
1/ Creation of 2 Special Economic Zones
2/ Reduce the complex system of farm subsidies
3/ Incentives to grow mobile banking services
Long term challenges facing this country
Challenge 1: Improve level of human capital to help make growth more inclusive / sustainable
Challenge 2: Diversify out of copper mining
Challenge 3: Increase government revenue and reduce scale of distortionary state subsidies

3. Evaluating Main Strengths and Weaknesses for Zambia
Competitive Strengths
1/ Rich natural factor endowment (copper & emeralds)
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
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?
Main Weaknesses in their Economy
1/ Vulnerable to global slowdown / Zambia does not have a stabilisation fund / wealth fund to draw upon
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
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