A REPORT of the influential Economist Intelligence Unit (EIU) has predicted that President Rupiah Banda and the MMD are likely to retain power in the 2011 general elections because of the influence of incumbency and the recovery in both the local and global economy.
The report, however, warns that stagnation in economic policy is at risk as political tensions ahead of the 2011 elections could slow reforms.
“Real Gross Domestic Product (GDP) will grow at a robust 6.8 percent in 2010 as copper production rises in response to the strong recovery in copper prices and agricultural production continues to benefit from favourable weather and government subsidies,” the report reads.
The unit predicts that domestic revenue collection will gradually improve as the mining sector grows and world trade begins to recover from the effects of the recession.
It says that as a result of this, the fiscal deficit will fall to 2.7 percent of GDP in 2010 and 2.4 percent in 2011.
The exchange rate will appreciate slightly to K4, 660 to US$1 in 2010 as the increase in foreign exchange inflows from copper exports outweighs the slight decline in donor support.
The EIU also notes that the current-account deficit is expected to fall to 0.3 percent of GDP in 2010 as higher copper prices boost exports, before increasing slightly to 1.1 percent of GDP as copper production stabilises and import demand continues to grow.
“Former President Frederick Chiluba has endorsed Mr Banda’s candidacy in the 2011 presidential election. This will buoy Mr Banda’s electoral prospects.
“Two of the country’s largest mining firms have announced new planned investments in the copper sector in response to the surge in copper prices,” the report reads.
On agriculture, the EIU says Government expects another bumper maize harvest in 2010, underpinned by favourable weather conditions and an increase in the number of farmers benefiting from the state’s fertiliser subsidy scheme.
“Tax collection in January exceeded budgetary targets by K29 billion (US$6.2m), marking a break from the trend observed in 2009,” reads the EIU report.
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[eiu.com]