Maravi

Fundanga predicts 7.5% growth

COMMENT - That is not 'bad fiscal management', that is neoliberal economics in action. Supply Side Economics always leads to the destruction of demand (wages) and a tsunami of overproduction (last time around, it led to the Great Depression). Deregulation of the financial markets has led to hundreds of trillions of dollars in exotic derivatives, when the global economy is only about 60 trillion dollars. This is Free Trade and Deregulation in action.

Fundanga predicts 7.5% growth
By Chiwoyu Sinyangwe
Tue 03 Aug. 2010, 04:01 CAT

BANK of Zambia governor Dr Caleb Fundanga has predicted a 7.5 per cent economic growth this year, buoyed by rising copper output rallying on the recovering global economy and increased maize production.

And Dr Fundanga launched a scathing attack on Western countries, accusing them of “messing up” the global economy through bad fiscal management.

Last June, finance minister Dr Situmbeko Musokotwane said Zambia has cut its economic growth forecast for 2010 to 5.8 per cent from seven per cent due to the possibility of a sluggish global economic recovery.

In a Letter of Intent to International Monetary Fund (IMF) managing director Dominique Strauss-Kahn, Dr Musokotwane stated that real Gross Domestic Product (GDP) growth is expected to fall marginally to 5.8 per cent in 2010 before rising to six per cent thereafter “Downside risks, however, still remain amidst uncertainties about a full-fledged global recovery in 2010 and rising oil prices,” stated Dr Muskotwane.

But Dr Fundanga said the indication in key economic sectors were that the country’s economy was booming and poised for higher growth than 6.4 per cent GDP achieved this year.

He said the country’s lifeblood, the copper mining sector, as well as the 2.7 million metric tonnes of maize produced this year, the highest in over two years, are some of the key drivers of Zambia’s expected increased economic output for this 2010.

“Zambia has fared very well during the crisis with our economy growing by 6.4 per cent last year. This year, we are targeting and even bigger growth with some projections talking of 7.5 per cent and so forth which is not far fetched. So, if we continue to work hard, we can still survive in spite of the global economic crisis. Grain production increased. Globally things have been bad but Zambia has been one of the best performing countries in Africa,” he said.

Dr Fundanga said mining sector would continue to remain key to Zambia’s economic growth.

“The mining sector has done very well because during the crisis when the price of copper fell, production was going up,” he said. “And when the price started to go up, we can only benefit from improved production.”

He said increased private sector investments in the mining sector which have peaked at US $5 billion in the last eight years were key to the recent success seen in the sector which accounts for 70 per cent of the country’s foreign exchange earnings.

Dr Fundanga said the country had continued to attract mining investments to lift output to 750,000 tonnes this year and one million in 2012.

“The ultimate aim is that eventually we should produce one million metric tonnes and I don’t see a reason why we can’t,” Dr Fundanga said. “Konkola Deep which was very key to that ambition was inaugurated recently – which means that there is more investment going into mining and as long as the price holds, we will continue to have more investments and so far, the price has been very nice to us and we hope it will continue to hold. This is happening because the private sector has invested a lot of money. Investment is key to growth. Now, that the copper price has recovered, we are able to benefit.”

Dr Fundanga said the country’s diversification from mono-dependence on copper would only succeed if gains from the mining sector were maximised.

“But the whole point is that when things are good, we should invest in diversification,” he said. “We should use proceeds of rosy periods to invest in diversification so that next time, even if the price of copper is down, they will be other economic activities all over the country and therefore, we won’t feel the pain of the declining mining industry.”

Dr Fundanga said new sectors being introduced in the country’s economic sector would help to further improve the domestic economy.

He cited increased production of wheat, coffee, tea as some of the new sectors that would enhance economic output in the country.

“Very soon, we will be producing palm oil,” Dr Fundanga said. “Even in the mining sector, the large volumes of investments in exploration have also made us to start producing nickel, uranium and coal production is going to be revived, a new company that will even be producing electricity has come in. All these show that people are willing to take advantage of these new developments and I believe it is not just the foreign investors even Zambian investors are also responding despite the various challenges.”

And Dr Fundanga accused of Western countries of mismanaging their economies, resulting in widespread economic blues throughout the world.

Concerns over European debt reached a flash point in recent months, battering financial markets and triggering a crisis of confidence for the euro zone.

The European debt has been cited as the reason for weak performance of kwacha against major convertibles since the beginning of the second quarter of this year.

The weakening kwacha is said to have largely been influenced by a drop in international copper prices as demand for the commodity has been depressed by the Eurozone crisis.

“The global economy is recovering thanks to China which is the engine for growth,” Dr Fundanga said. “The Greek – the Eurozone crisis has caused a slowdown on the recovery of the global economy and it has also affected us because each time the Euro crisis was going up, it was affecting the exchange rate and the demand for copper. But the Europeans have taken measures to arrest the Greek situation and other countries in similar predicaments, and we hope these measures can hold.”

Dr Fundanga said developing countries were managing their economies better than Europeans.

He said the local economy was so well-managed that it could never experience a crisis like the ones ignited in Greece.

“Ultimately they Europeans can start to run their economies properly. If you look in the past most of these developed countries used to tell us deficit spending is a bad thing and you must reduce,” said Dr Fundanga.

“But today, if you look at countries like Zambia, deficit spending is at low levels and that is why we cannot have a Greek type of crisis. Now, the developed countries the ones who were teaching us on how to manage properly, they are the ones who are messing us up. They should practice what they preach. They shouldn’t just come to preach to us about good fiscal management and yet they are doing funny things to their economies. If the Euro area recovers, we can then see recovery because it is a major trading block, the US economy is recovering now and we have growing China, and we will all grow up.”

Labels: CALEB FUNDANGA, GDP

posted by MrK @ 2:27 PM