Zambia cuts 2010 GDP forecast to 5.8 pct: minister

By Chris Mfula

LUSAKA (Reuters) - Zambia has cut its economic growth forecast for 2010 to 5.8 percent from 7 percent due to the possibility of a sluggish global economic recovery, Finance Minister Situmbeko Musokotwane said.

The government and Bank of Zambia are also aiming for inflation of 8 percent by the end of the year, Musokotwane said in a letter to the International Monetary Fund seen by Reuters on Monday. Annual inflation stood at 7.8 percent in June, slowing steadily from double-digit rises last year.

Despite the lower economic growth forecast, outlined in the June-dated letter, senior Treasury officials said growth was likely to come in above the new forecast.

"We revised the target downwards because of the global economic crisis but agriculture and mining have performed very well and we expect to grow the economy beyond 5.8 percent," Likolo Ndalamei, Secretary to the treasury, told Reuters.

In the letter, Musokotwane said growth in Africa's biggest copper producer would be driven mainly by new investments in mining, power generation, construction and agriculture.

"As agricultural output reverts to trend levels, real GDP growth is expected to fall marginally to 5.8 percent in 2010 before rising to 6 percent thereafter," Musokotwane said.

"A number of large investments in the mining and energy sectors are expected over the medium-term."

Musokotwane also said Zambia would start financing talks this year for the 600 megawatt Kafue Gorge Lower power project and the 120 MW Ithezi-Tezhi project. Both are expected to be completed by 2017.