Zambia's economic growth seen steady, construction helps

JOHANNESBURG (Reuters) - Zambia's economy will grow steadily despite uncertain copper prices, as construction and agriculture supports Africa's top producer of the metal, a Reuters poll found.

The survey of 10 economists showed the landlocked southern Africa nation's economy expanding 6.8 percent this year, slightly below the 6.9 percent forecast in a June poll, and then by 7.1 percent in 2013.

While better than an estimated 6.6 percent growth for 2011, that would still be some way short of the 7.6 percent rise in gross domestic product (GDP) in 2010 that was mainly driven by the construction sector.

Foreign mining companies are increasingly investing in Zambia, and the resulting windfall will give a boost to other industries too.

"GDP growth in Zambia is expected to be driven by strong growth in agriculture, the mining sector and construction," said Fredrick Mulenga of Zanaco, a state-owned bank.

The slight downgrade from the previous consensus can be attributed to a sharp fall in copper production during the first half of this year, as orders waned from resource-hungry China.

Nonetheless, growth in Zambia is still up there with other heavyweights in the continent. The government has targeted growth of 8 percent over the next five years and for the inflation rate to stabilise to 5 percent over the medium term.

MINING EXPANSION FUELS GROWTH

Zambia has been earmarked for foreign direct investment (FDI) to exploit its vast copper deposits - mined mainly in the northern parts of the country - as well as other minerals such as uranium.

Though future prices of the minerals are uncertain, foreign firms have not shied away from investing in the country's potential with Canadian miner First Quantum Minerals partnering a Zambian company to develop a new copper mine.

Investment in mining will spill over to the construction sector as it benefits from the development of new mines and a more government projects to create more jobs through infrastructure spending.

"The wave of foreign direct investment into the copper mining sector in 2004-07 will continue to drive a steady increase in copper production in 2012-13, helping underpin growth," said David Cowan, economist at Citi.

Inflation is expected to average 6.8 percent before picking up to 8.1 percent in 2013.

"Inflation is expected to remain in the single-digit range due to lower food costs after a bumper maize crop though it might push up in 2013," said Zanaco's Mulenga.

Zambian inflation ended 2008 at almost 17 percent but is currently 6.2 percent, similar to other countries in the region.

Source: http://news.yahoo.com/zambias-economic-growth-seen-steady-construction-helps-080737122--business.html

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