The Bank of Zambia Says The Risk Of Global Growth Remains Tilted Downwards.

BoZ further notes that Inflation outcomes are expected to range from a minimum of 13.4% to 14.3% with a 30% probability; 11.9% to 15.0% with a 70% probability; and 11.2% to 15.6% with a 90% probability.

This is according to the Bank of Zambia January-June Monetary Policy Statement.

The Bank notes that the annual overall inflation is projected to remain above the upper bound of the 6-8% target range in the first half of 2020.

“Annual overall inflation is projected to remain above the upper bound of the 6-8% target range in the first half of 2020, averaging 13.5%, up from the outturn of 10.3% in the second half of 2019. Underlying this projection are the effects of on-going electricity supply challenges and increased external debt service payments, which affect inflation through the expectations and exchange rate channels. The upside risks to the inflation outlook include further increases in the prices of maize grain and related products, the second round effects of the increases in fuel and electricity prices as well as slower progress on fiscal consolidation,” BOZ stated.

“However, it is envisaged that inflation could decline faster than currently projected on account of the anticipated improvement in agricultural output due to the favourable rainfall pattern observed so far during the 2019/2020 crop season. The range of possible inflation outcomes during the first half of 2020 are illustrated in Chart 1. Inflation outcomes are expected to range from a minimum of 13.4% to 14.3% with a 30% probability; 11.9% to 15.0% with a 70% probability; and 11.2% to 15.6% with a 90% probability.”

The Bank says the global economy is projected to pick up to 3.2% in 2020.

“The global economy is projected to pick-up to 3.2% in 2020 and 3.4% in 2021 from 2.9% in 2019. Underlying the pick-up in growth is the recovery in manufacturing, business confidence, investment and global trade, largely reflecting diminishing uncertainty related to trade tensions following the signing of the US-China Phase One Trade Deal , and the formal exit of the United Kingdom(UK) from the European Union on January 31, 2020 . The accommodative monetary policy stance adopted by some central banks in advanced and emerging market economies is also expected to continue supporting global economic growth in the near-term.”

“The risks to global growth, however, remain tilted downwards, although they have become less pronounced. They include policy uncertainty related to the possibility of a re-escalation of trade tensions; renewed geopolitical tensions in the Middle East, notably between the US and Iran; rising debtvulnerabilities; weaker external demand; lower commodity prices; anticipated extreme weather events and the impact of the recent outbreak of COVID-19. Increased household spending and expected rebound in capital investment should provide support to economic growth. Weak external demand, high debt levels, lower commodity prices, and extreme weather conditions are some of the major downside risks to growth prospects. Despite a positive SSA growth outlook, economic activity in some of Zambia’s major trading partners i.e. the Democratic Republic of Congo (DRC) and South Africa is expected to remain subdued over the medium-term. Real GDP growth for the DRC is projected to slowdown to 4.0% in 2020 and 3.9% in 2021 from 4.3% in 2019 mainly on account of reduced mining sector production,” stated BoZ.

“Inflation is projected to remain above the target range over the first half of 2020 on account of the effects of on-going electricity supply challenges and increased external debt service, which affect inflation through the expectations and exchange rate channels. However, it is envisaged that inflation will decline thereafter on account of the anticipated improvements in agricultural output due to the favourable rainfall pattern
observed so far during the 2019/2020 crop season. Taking into account weak domestic growth, liquidity challenges.”

Copyright © 2020 ZR.

The post The Bank of Zambia Says The Risk Of Global Growth Remains Tilted Downwards. appeared first on Zambia Reports.

LATEST NEWS

LEAVE A REPLY

Please enter your comment!
Please enter your name here