The Zambian economy is projected to record its first contraction since 1999 as coronavirus headwinds pummel the southern African country whose lifelines are mining and tourism, central bank governor Denny Kalyalya announced on Wednesday.
Kalyalya said economic conditions in the country worsened in the first quarter of 2020, “with the volume of services, new orders and profitability all registered historic lows.”
“With the COVID-19 pandemic, the already challenged domestic macroeconomic environment has worsened. Economy is projected to contract by 2.6% in 2020, the lowest in 20 years, from a growth of 1.9% in 2019,” the governor told journalists in the capital Lusaka.
He said underlying this outlook “is the projected contraction of output in tourism, wholesale and retail trade, construction, manufacturing, mining as well as electricity sectors.”
Business conditions in the private sector are reported to have deteriorated as output and new orders sharply declined on account of falling consumer spending and company shutdowns associated with coronavirus.
Kalyalya revealed that to mitigate the negative effects of COVID-19 on the economic activity, the Bank of Zambia’s Monetary Policy Committee has decided to lower the benchmark lending rate by 225 basis points to 9.25 percent.
The decision was taken “to mitigate the adverse effects of the COVID-19 pandemic on financial sector stability, economic activity and ultimately on people’s lives and livelihoods.”