The Economics Association of Malawi (Ecama) has indicated that Malawi’s economic outlook remains highly uncertain projecting that the local economy will remain saddled with still-high inflation and exchange-rate instability.
The economic think tank further believes that expected impact of the El Niño weather events in early 2024 will weigh heavily on agriculture, but growth will accelerate, driven by development finance catalysed by the International Monetary Fund (IMF) extended credit facility (ECF).
In a response to a questionnaire, Tuesday, Ecama President Bertha Chikadza said the decline in inflation from 35 percent in January to 31.8 percent in March compels them to believe that inflationary pressures may continue to ease.
She further noted that in the first quarter there were minor fluctuations on the exchange rate and that the Kwacha remained relatively stable.
“The economic outlook for the period under review seems promising considering both exchange rate and inflation are stabilizing. Gross reserves are not currently stable; however, our optimism is very high with agricultural season just peaking, especially, tobacco sales just opened on April 15 2024 which is the major forex earner in Malawi,” Chikadza said.
In a separate interview, General Secretary of the Financial Market Dealers Association (Fimda) James Mbingwa said in the first quarter a number of things improved in the economy which was a positive sign.
“Of course, there are quite a number of risks specifically to do with the current challenges that the agricultural season has faced that might lead to a change in the expected growth for 2024.
“Interest rates have been going up, the policy rate has been going up, and that is a way the Central Bank to try to bring back price stability. I can say that the efforts are there to achieve a stable economy going forward,” Mbingwa said.
Economist Marvin Banda said the real economy is still reeling from the exchange rate shocks that have continued from last year during the first quarter which is the tail-end of Malawi’s Financial Year as well as maximum agricultural inputs which have negative cyclical effects on the business cycle.
“The Reserve Bank’s efforts of keeping the Liquidity Reserve Requirement unchanged did not have the desired effect as borrowing is agri-intensive leaving the remaining sectors of the economy vulnerable.
“With the harvest products already at the market and the progression of the business cycle, we should expect inflation to reduce ceteris paribus until we hit the peak of our Gross official reserves in June from whence it takes an average of 11 weeks for inflation to begin to pick up again,” Banda said.
In a recent interview, Secretary to Treasury Betchani Tchereni said Malawi’s economic situation is improving each passing day.
“After November 2023, the economic data has started to be different, a little more positive. For instance, headline inflation has started to ease downwards, foreign exchange reserves are higher than what the report, food inflation is going down and there is direct budgetary support,” Tchereni said.
The government expects the economy to grow by 3.2 percent in 2024 and 4.8 percent in 2025 on the back of increased industry activity, contained inflation and improved supply of foreign exchange mainly from the donor community.
A recent World Bank report indicates that over the past 30 years, Malawi’s per capita gross domestic product (GDP) has increased by over 50 percent, a growth trajectory comparable to that of other countries in the region.
However, some peer countries have managed to triple their per capita GDP over this time, leading to substantial reductions in poverty rates. Additionally, given its significantly lower baseline, this has meant Malawi has not been able to catch up to its more prosperous neighbours.
