Zambia is large, landlocked, resource-rich country with sparsely populated land in the center of Southern Africa. It shares its border with eight countries (Angola, Botswana, Democratic Republic of Congo, Malawi, Mozambique, Namibia, Tanzania, and Zimbabwe) that serve as an expanded market for its goods.
Zambia is experiencing a large demographic shift and is one of the world’s youngest countries by median age. Its population, much of it urban, is estimated at about 17.9 million and growing rapidly at 2.8% per year, partly because of high fertility, resulting in the population doubling close to every 25 years. This trend is expected to continue as the large youth population enters reproductive age, which will put even more pressure on the demand for jobs, health care and other social services.
Economic Outlook
After 15 years of significant socio-economic progress and achieving middle-income status in 2011, Zambia’s economic performance has stalled in in recent years. Between 2000 and 2014, the annual real gross domestic product (GDP) growth rate averaged 6.8%. The gross domestic product (GDP) growth rate slowed to 3.1% per annum between 2015 and 2019, mainly attributed to falling copper prices and declines in agricultural output and hydro-electric power generation due to insufficient rains, and insufficient policy adjustment to these exogenous shocks.
The COVID-19 (coronavirus) pandemic pushed into contraction an economy that was already weakened by recent persistent droughts, falling copper prices and unsustainable fiscal policies. Economic activity through Q3 of 2020 contracted by 1.7%, as declines in industry and services outweighed growth in agriculture. Mining and services suffered from lower global demand and social distancing measures earlier in the year, respectively. However, relaxation of the lockdown measures in second half and a global pick-up of copper prices helped activity to recover. Overall, the economy is estimated to have contracted by 1.2% in 2020 - the first recession for Zambia since 1998. Inflation remained in double digits throughout 2020--averaging 15.7% --and reached a high of 22.2% in February 2021.
A gradual recovery is expected, with GDP growth projected at 1.8% in 2021 and will average 2.8% over 2021-23. Higher copper prices, the commissioning of a new hydro power station, and a return to normal rainfall patterns are expected to support growth in agriculture and electricity production, key contributors to Zambia’s industry and service sectors. However, the impact of COVID-19 will continue to dampen activity, especially in tourism and retail and wholesale trade. The risks to this outlook are balanced. Timely achievement of macroeconomic stability will largely depend on progress on debt restructuring, fiscal consolidation efforts and the availability of the COVID-19 vaccines. A prolonged fallout from COVID-19 could amplify fiscal and domestic liquidity challenges and lengthen the time for Zambia to embark on key macroeconomic and structural reforms. Rainfall variability remains a key structural risk to Zambia’s sustainable growth, affecting key sectors like agriculture and electricity, and highlights the need to incorporate climate-smart solutions in Zambia’s long-term growth strategy.
Political Context
Zambia is considered a stable country with successful democratic elections held every five years. The current President is Edgar Chagwa Lungu of the Patriotic Front Party who was re-elected in August 2016, in a closely contested presidential race with his main rival, Hakainde Hichilema of the United Party for National Development (UPND).
The next elections will be held on August 12, 2021.
Last Updated: Mar 19, 2021
