Advertisement
Business

Consumption borrowing increase worries experts

Advertisement
Ben Kalua

Economic and financial market experts have expressed worry over increasing levels of loans among consumers stemming from the rising cost of living.

A recent monetary policy report by the Reserve Bank of Malawi shows that annual growth in private sector credit edged up to 18.6 percent in December 2021 from 15.3 percent in November 2021 and 16.4 percent recorded in December 2020.

The central bank further says, apart from Community, Social and Personal Services, the credit concentration was also in wholesale and retail trade at 22.6 percent, agriculture, forestry, fishing and hunting at 16.2 percent and the manufacturing sector is the lowest at 8.7 percent.

Advertisement

Financial Market Dealers Association of Malawi President McLewen Sikwese said, conversely, companies’ financial performances have suffered over the very period from supply chain disruptions and weak demand, hence reduced appetite to borrow as they slowed down operations due to increased uncertainty in the operating environment.

“Considering the borrowing from individuals is mostly for consumption, the immediate impact is the increased demand for goods and services from households (mainly imports) with the medium term impact being the slowdown in the economy as the productive resources of the economy will remain underutilised,” Sikwese said.

Economics Association of Malawi Executive Director Frank Chikuta said the development is a setback to the dream of having an industrious economy with a widened export base that can reduce trade deficit.

Advertisement

“This is not good for promoting production because, ideally, credit is supposed to be going to a sector that will grow the economy, but with this development, it means we may not achieve the dream of having a predominantly exporting nation,” Chikuta said.

Economics Professor from University of Malawi Ben Kalua said the concentration only shows the negative performance of the economy.

“If such a trend continues for the long run, it may even lead to recession because the country’s output production will remain low whereas aggregate demand will continue rising,” Kalua said

Facebook Notice for EU! You need to login to view and post FB Comments!
Advertisement
Tags
Show More
Advertisement

Related Articles

Back to top button
Close

Adblock Detected

Please consider supporting us by disabling your ad blocker