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Ecama paints gloomy outlook for economy

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Local economic think-tank, the Economics Association of Malawi (Ecama), says the economic outlook remains mixed and murky.

It says stability could not be attained until after the first quarter of 2022.

The economist’s umbrella body believes that, between now and March 2022, the local unit, the Kwacha, would continue losing value against other trading currencies and that inflation would remain on an upward spiral.

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Ecama Executive Director Frank Chikuta said month-on-month inflation is following seasonal trends as it has been declining in light of this year’s good harvest.

However, he was quick to indicate that the decline is at a reduced rate, which indicates that the monthly trend will soon reverse and that monthly food inflation will start increasing.

“Year-on-year inflation has, in contrast to the monthly trend, been on an upward trajectory, despite the bumper harvest. One reason which has been identified to be driving this trend is the administered prices.

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“Beyond the administered prices, however, there could be other issues at play. It appears that the seasonal trend, which we have been accustomed to, is going through a transformation,” Chikuta said.

He went on to say that the major risk to growth projections remains the Covid situation.

Chikuta added that the longer the third wave persists, the more likely that the growth projection may not be attained.

“However, there is still optimism that, with the vaccination drive and other initiatives, economic activity will pick up. The stability of the kwacha depends on other things, including demand and supply; so, despite the tobacco selling season, the currency may still depreciate due to demand,” Chikuta said.

In a separate interview, economic expert Sane Zuka said Malawi’s economy has greatly been affected by the Covid pandemic.

“The services and tourism sectors have been badly affected and are unlikely to return to pre Covid performance levels in the near future. Malawi is not generating adequate revenues and forex from these sectors. Locally, Covid has distorted international supply chains and greatly weakened Malawi’s capacity to produce products and export to international markets.

“All this has increased pressure on the foreign exchange demand the country needs, including importing the much needed medical pharmaceuticals. Initiatives to contain Covid are also weighing heavily on the economic activities, thus not only suppressing domestic demand but also increasing the cost of production,” Zuka said.

Zuka further said containing inflation and weakening Kwacha will largely depend on how the situation of Covid will evolve in Malawi and globally.

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