This is a two page revision document on the Zambian economy designed for A2 macro students including those taking the June 2016 OCR F585 paper. Our You Tube Channel has special revision sessions on Zambia For example https://youtu.be/nSyukwIyZ-Y

1.
Economic'Growth and'Development'in'Zambia
Key Macro Data'(2015'or'latest)
Latest&annual real&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)
J7%
Govt&debt&(%&of&GDP) 60%
Yield on&10JYr&Govt&
Bonds&(Per&Cent)
9% yield&on&
Euro&Bond
Investment&
(%&of&GDP)
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)
J6%&
(deficit)
Main&corporate&tax&rate&
(Per Cent)
35%
Competitiveness& rank 96th/144
Corruption Perception&
Ranking
85th/185
Ease&of&Doing&Business&
Ranking
111th/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&
(High)
Inward FDI&(%&of&GDP) 5J6%
Remittances&(%&of&GDP) 0.5%
Aid&(%&of&GDP)
<&5%&of&
GDP
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(world(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(and(tax(revenues(decline
Development*and*Growth*Issues*/*Policies
3*factors*limitingdevelopment*progress
1/(Landlocked with(poor(infrastructure
2/(High(extreme(poverty(&(rural/urban(inequalities
3/(Low(productivity(in(rural subsistence(farming
4/(80%(of(people(are(in(vulnerable(employment
3*policies*used*to*improve*the*supplyNside
1/(Special(Econ(Zones (0%(tax(on(profits(for(5(years)
2/(Reducing the(complex(system(of(farm(subsidies
3/(Incentives(to(grow(mobile(banking(services
Long*term*challenges*facing*this*country
Challenge*1:*Improve(the(level(of(human(capital(to(
help(make(growth(more(inclusive(/(sustainable
Challenge*2:*Diversify(out(of(copper(mining(and(
attract(investment(into(farming(&(tourism(&(SMEs
Challenge*3:*Increase(government(revenues(and(
reduce(the(scale(of(distortionary(state(subsidies

2.
Evaluating*Strengths*and*Weaknesses*for*Zambia
Competitive Strengths*for*Zambia
1/#Rich natural#factor#endowment#(copper#&#emeralds)
2/#Young#workforce#(half pop#are#under#15yrs#old)
3/#Now#a#middle*income*country –real#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#been a#favoured#venue#for#inward*foreign*
investment worth#5T6%#of#GDP#annually#with#much#of#
this#coming#from#China.
• Zambia#still#has#strong#longTrun#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*theZambian Economy
1/ Vulnerable to#global#slowdown#/#Zambia#does#not#
have#a#stabilisation#fund#/#wealth#fund#to#draw#upon
2/#High#secondary school#dropTout#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#underTdeveloped# /#high#interest#rates#of#30T
40%#for#small#businesses# /#farmers#limits#enterprise
Other*Useful*Contextual*Knowledge
• 40%#child#labour#(14%#in#developing countries)
• Zambia#is#95%*dependent*on*hydroIelectricity*–
much goes#to#power#the#copper#mines.#Drought#is#
leading#to#power*shortages*with#rolling#blackouts.
• The#big#threat#facing#Zambia#is#stagflation i.e.#a#sharp#
reduction#in#GDP#growth#accompanied#to#doubleT
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#extreme#poverty#reduction
Key$Challenges$for$Economic$Transformation$in$Zambia
Enterprise
Diversification
Resilience
Productivity
•Drive6private6sector6innovation
•Micro8finance6in6urban6and6rural6
areas6to6promote6gender6equality
•Less6reliance6 on6state6businesses
•Lower6the6risk6of6premature6de8
industrialization6of6manufacturing
•Expand6tourism6/6financial services
•Expand farm6exports6globally
•Raise6household6income6and6savings
•Expand6insurance6and6pensions
•Stronger6government6finances6with a6
fairer6mining6tax6regime
•Expand FDI6into6commercial6farming
•Raise6human6capital6/6expertise
•Address6huge6infrastructure6gaps
The6crucial6mid8term6challenge6facing6Zambia6is6to6improve6
inclusive$sustainable$growth$and6maintain$macro$stability
Economic6growth6in6Sub8Saharan6Africa6in6future6years6is6likely6to6favour6less6resource8intensive6countries6
such6as6Ethiopia,6Kenya6and6Uganda.6They6are6more6diverse6&6have6bigger6consumer6/6retail6markets