Zambia's economic growth seen at 7 percent next year

JOHANNESBURG (Reuters) - Government infrastructure spending should help Zambia's economy grow faster over the next two years, providing copper prices do not fall, according to a Reuters poll.

Median forecasts from last week's survey of 13 economists show Africa's top copper-producing economy expanding by 6.8 percent this year and 7.1 percent next year - in line with the August poll - then by 7.3 percent in 2014.

Growth slowed to 6.6 percent in 2011 from 7.6 percent in 2010.

The government's $6.3 billion budget for 2013, announced on last month, plans higher spending to fund infrastructure and create thousands of jobs.

"The large-scale infrastructure investment programmes announced in the 2013 budget will support growth in Zambia in the coming years," said Shilan Shah, Africa Economist at Capital Economics.

The government also trimmed its forecast for gross domestic product (GDP) growth over the next five years to above 7 percent from an earlier forecast of 8 percent.

The landlocked southern Africa nation is one of the fastest-growing economies on the continent and its government received bids of $11.9 billion for its debut $750 million Eurobond in September.

Zambia's long-term growth prospects of roughly 7 percent a year and possibly more puts it in the same league as Nigeria and Angola. However, copper accounts for 30 percent of GDP and three quarters of total export receipts, making Zambia vulnerable to falls in the price of the metal.

A Reuters survey last month forecast cash copper prices would average $8,020 a tonne in 2012, rising to $8,267 in 2013, which bodes well for Zambia. The benchmark contract on the London Metal Exchange (LME) was trading around $7,780 a tonne on Monday.

Consumer inflation is expected to average 6.6 percent this year, quickening to 7.0 percent before slowing to 6.8 percent in 2014. Inflation reached 6.8 percent year-on-year in October.

"Inflation remains in the single digit range, closing around 6.8 percent in 2012 with a light increase expected in the following years," said Kunda Chikumbi of Zanaco, a state-owned bank.

The Bank of Zambia increased its benchmark interest rate by 25 basis points to 9.25 percent last month, saying its monetary policy committee had noted upward risks to inflation.

The central bank expects inflation of around 7 percent in 2013 as a bumper harvest helps to moderate food price pressures.

Source: http://news.yahoo.com/zambias-economic-growth-seen-7-percent-next-144204585--business.html

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