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Current account deficit to worsen in 2017

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Government says it expects Malawi’s current account deficit to worsen in 2017.

A current account deficit occurs when a country spends more money on the goods and services it imports than it receives for the goods and services it exports.

According to the 2017 Malawi Government Economic Report, the country posted a current account deficit of $756.8 million in 2016.

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The report, which is produced by the Ministry of Finance, says Malawi’s current account deficit is projected to increase by 12.1 percent in 2017 to $848.5 million.

“As a result of the increase in economic activities, due to good weather conditions, it is expected that demand for goods and services will increase.

“Some of the demand will be met by imports. At the same time, decline in tobacco production will reduce export earnings.

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“As the gap between exports and imports is expected to widen, the current account deficit is expected to worsen,” the report says.

According to Treasury, Malawi’s current account deficit decreased from 19.2 percent of the GDP in 2015 to 14.6 percent in 2016.

In 2016, aggregate demand declined, affecting demand for both domestic and imported goods and services.

Treasury said this resulted in the country’s imports growing at a slower rate than exports, thereby resuting in improvements in trade balance.

“In the medium to long term, the government is implementing measures to ensure demand switches from imported to domestic goods and services.

“At the same time, government is promoting exports of goods and services. In order to achieve export-led growth, the government developed the National Export Strategy and is implementing the Best Buy Malawi Campaign, “the report says.

Treasury says the initiatives are expected to reduce the current account deficit in the medium term.

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