It has been a very positive and epic week for Zambia characterized by talk of Republican President Hakainde Hichilema’s debut appearance at the United Nations General Assembly (UNGA) a week ago. Other metrics for the month such as inflation reported by the Zambia Statistics Agency (ZSA) are ebbing fast with September print at 230 basis points lower to 24.4% as base effects and lagging effects of currency strengthening weigh in.
The post election bond rally that sent the currency on a winning streak gave momentum to economic activity through an opportunity for businesses to claw back eroded growth induced by the COVID pandemic. However strong recovery prospects has started to exert pressure on the exchange rate causing reversal of some of the gains that accrued in the last few weeks.
Markit Economics will release its September manufacturing pulse in the first week of October at which we forecast a rebound in factory activity. August print was recorded at 49.7 at which the copper producer is forecast to headline its purchasing managers index (PMI) at 50.2 supported by increased activity due to greater demand for inputs as the currency appreciation effects supported. 50 is the benchmark for expansion (>50) and contraction (<50).
It is expected that with easing credit costs as the yield curve compresses which is expected to stimulate growth. The Kwacha yield curve has climbed down 825bps on average improving prospects of fresh credit.
There is scope for stronger growth for the Southern African nation in the fourth quarter of the year.
The Kwacha Arbitrageur