The Centre for Trade Policy and Development (CTPD) has released a statement on the economic outlook for 2023, highlighting the challenges and risks faced by the Zambian economy in light of the ongoing global uncertainty. The statement, issued by Mr. Boyd Muleya, Head of Research at CTPD, emphasizes the need for efficient government communication and proactive measures to mitigate the risks and achieve stability in the coming year.
“The year 2022 was eventful but with uncertainties caused by the continuing Russia/Ukraine war, the COVID 19 pandemic and subsequent global food and energy crisis, global inflation, and its corresponding policy rate hikes,” says Mr. Muleya. “Further, slow growth in the US, China, UK, and the Euro zone, resulted in adjustments to growth predictions in advanced countries, emerging markets, and developing economies. 2022 reminded the world of the melancholy of stagflation of the 1970s when inflation was high and growth was slowing down, with possibilities of a recession.”
Despite these challenges, the statement notes that the Zambian government had managed to maintain stability in the Kwacha and inflation, and recorded a marginal reduction in interest rates and unemployment. However, the CTPD highlights several areas of concern, including the protracted debt restructuring process, delays in the implementation of the Farmer Input Support Program (FISP), and low absorption rates of the Constituency Development Fund (CDF) and Citizen Economic Empowerment Commission (CEEC) funds.
“The 2023 economic outlook is subject to several risks,” warns Mr. Muleya. “These include: the government needs to develop an efficient communication system to help citizens better manage their expectations, particularly when it comes to adjusting to various reform fatigue (cost-reflective energy rates, load shedding, multiyear tariff frameworks etc.), considering the high cost of living and that of doing business. Government must rely on forecasts and predictions to manage expectations in the various sectors like energy.”
Mr. Muleya also calls attention to the impact of global fertilizer shortages, climate change, the ongoing Russia/Ukraine conflict, and the resurgence of highly vaccine evasive COVID-19 strains on food and energy prices, as well as potential risks to government revenue, currency rates, and inflation. “Government should focus on import substitution on various imports like agricultural inputs to lower local prices,” he advises.
The statement also notes the potential for flash floods and late implementation of the FISP in 2022 to lower yields and endanger food security, as well as the uncertain feasibility of restoring macroeconomic stability through debt and fiscal sustainability in 2023. “The government must accelerate negotiations with various creditors to expedite the process,” says Mr. Muleya.
Despite a projected real GDP growth rate of 4 percent in 2023, the CTPD also cautions that inflation is expected to remain relatively stable but will face risks due to global upside inflationary pressures, possible COVID-19 resurgences, low yields due to delays in the distribution of agricultural inputs, and an increase in aggregate demand if efficiency on CDF and CEEC funds improves. “Consequently, inflation might not recede into the target band of 6-8 percent by the end of 2023,” warns Mr. Muleya. “Government should ensure that productivity capacity, operational efficiency and effectiveness is prioritized across all functions.”
In conclusion, the CTPD stresses the need for proactive measures to mitigate the identified risks and achieve stability in the coming year. “The government must focus on import substitution, drawing up predictable plans for procurement and distribution of farming inputs, expediting debt restructuring negotiations, and prioritizing productivity, efficiency, and effectiveness across all functions,” says Mr. Muleya.