LUSAKA (Reuters) – Zambia’s prospects of achieving this year’s economic growth forecast of 7 percent might not be feasible due to the prevailing global economic downturn, the central bank said on Wednesday.
Bank of Zambia Governor Caleb Fundanga also told a news conference that prospects of achieving single digit inflation in 2008 were slim and that a prolonged global economic crisis could dampen crucial foreign direct investments (FDIs).
Fundanga said expected higher government expenditure and lower seasonal food supplies in the last quarter of this year and the depreciation of the kwacha would make it difficult to achieve a 7.0 percent inflation target year.
“It is very likely that we are going to miss it (the inflation target), but the fight against higher inflation will continue,” Fundanga said.
“The pressures are so high that we will be lucky to even have 12.0 percent or 13.0 percent inflation (in December),” Fundanga said.
Fundanga said GDP growth could slow down because of declining investments in mainly the mining sector following the global financial squeeze and low food output.
A prolonged global economic recession could deepen risk aversion and discourage both portfolio and foreign direct investment in the southern African country.
Fundanga said a decline in commodity prices and reduction in demand for exports would affect the trade balance.
Zambia recorded a trade deficit of $224.8 million in the three months to September compared with a surplus of $231.7 million in the previous quarter.
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