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Oxford Economics Africa has revised Zambia’s 2025 Gross Domestic Product (GDP) growth forecast to a below-consensus 3.4 percent, citing the expectation of an unsatisfactory rainy season.
This contrasts with the International Monetary Fund’s (IMF) projection, which anticipates Zambia to be among the top 10 sub-Saharan African countries for GDP growth in 2025, with a forecast of 6.6 percent.
Irmgard Erasmus, Senior Economist at Oxford Economics Africa, explained that an inadequate rainy season has compounded Zambia’s economic challenges, including a weakening currency.
According to a report released on Thursday, he stated that the Zambian kwacha has recently hit a record low, largely due to severe drought conditions that have led to rising power prices.
The kwacha weakened for an 11th consecutive day, trading at 28.1200 per dollar in London, marking a 0.4 percent drop—the biggest in three weeks.
Erasmus noted that while a favorable rainy season could boost hydropower generation and reduce Zambia’s electricity import bill, the forecast remains cautious due to predictions of a weak La Niña.
This could limit the potential for recovery in the power sector, further exacerbating Zambia’s economic strain.
The country’s dependence on the Kariba Dam for electricity generation has been a significant factor in the kwacha’s decline.
Despite a slight increase in water levels, they remain at just 2.6 percent of usable storage, forcing mining companies to rely on expensive electricity imports.
This has led to widespread power outages, leaving both households and businesses reliant on costly generators fueled by imported fuel.
Additionally, external factors such as US President-elect Donald Trump’s trade tariffs could indirectly affect Zambia’s economy, particularly through their potential impact on China—one of Zambia’s key trading partners.
Despite these challenges, Oxford Economics Africa’s baseline forecast also accounts for higher imported inflation and the continued tightening of Zambia’s monetary policy.
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