Economic growth slowed down to 3.7% in 2015 primarily due to the negative effects of prolonged load-shedding in the second half of the year as well as a significant decline in the currency.
The first quarter of 2016 has blown by very quickly with some positive and negative trends emerging while certain things remain the same. Here is a quick review of Q1 2016:
After a 70% decline in 2015, the Kwacha has been very stable versus the US dollar and showed signs of strength toward the end of the quarter:
The effects of Central Bank policy tightening have been a significant contributor to this stability.
Copper was up 3.3% in the first quarter of this year:
Prices breached the $5,000 per MT mark for 5 days in March before dipping back below.
Inflation slowed down and declined for the first time 6 months to 22.2%:
The flow-through effects of last year's currency decline look to have bottomed-out.
Bank of Zambia (BoZ) kept the policy rate unchanged at 15.5% at the February committee meeting:
The economy is currently operating in a high interest environment.
Exports are up 48% year-on-year over the first two months of 2016 (March data unavailable) at K11.5 billion – led by a 55% rise in metal exports:
Imports are up 34% year-on-year over the same time period to KK12.4 billion – led by a 142% rise in consumer goods imports. The trade balance was at an 11-month low in January.
The Lusaka Stock Exchange (LuSE) All-share index close the quarter at K5,534.39, down 3.5%. Here' s table of the performance of individual equities on the exchange:
Things to Watch
1. Real Estate:
- A number of tenants at some major shopping malls in Lusaka are either being evicted or closing their stores. The stores are exposed to currency risk through dollar-denominated leases and due to the fact that most import their products for re-sale.
- Vacancies in residential as well commercial properties are on the rise in Lusaka (plenty of 'For Sale/Rent' signs outside premises of properties which don't normally advertise in that manner!).
- Parliament is set to be dissolved in May 2016 which will see a kick off a flurry of endorsements, alliances, campaign spending etc. prior to the August 11 elections.
- The uptick in rainfall towards the period at which the rainy season traditionally comes to an end should help prop up water levels in major dams over the next few months.
- The Maamba themal project (300MW) should be fully online by June 2016 which will also help cut down power outages.
- Even though (according to the Agriculture Minister) Zambia will produce enough maize for itself (and a bit more), a regional deficit of the staple crop will put pressure on domestic pricing. This will not only affect the price of 'mealie-meal' but also flow-through to animal feed.
- The Food Reserve Agency (FRA) will have to pay significantly more than the K75 per 50Kg bag they paid last year for strategic reserves – putting further pressure on Government finances.
5. Non-performing Loans:
- The Banking sector could see a spike in non-performing loans as a consequence of pressure on businesses from higher interest rates, effects of load-shedding, effects of currency depreciation and a generally tougher environment for the consumer.
- The Government held talks with the IMF about centered on an economic recovery program. Nothing concrete was announced but some news could come out in mid-April during the IMF/World Bank Spring Meetings.
Trying to decipher this puzzle that is Zambia by using a variety of publicly available data (structured and unstructured) in conjunction with my own skill/experience. * * *