Economics Association of Malawi (Ecama) says it foresees mounting pressure on inflation and performance of local unit, the kwacha, in the coming months as part of effects of Covid-19 pandemic on the local economy.
In its assessment of Covid-19 impact on the economy, the economic think-tank observes that disruption of the supply chain stemming from the pandemic may result in panic buying of goods and services.
This, Ecama says, may exert pressure for inflation.
On performance of the kwacha, the association holds that due to limitations on trade, affecting exports of Malawi as well as a drop in tourism, streams of foreign currency may be narrowing.
“This may be exacerbated by possible decrease in foreign direct investments to Malawi as most development partner countries focus on their local needs. This could potentially put pressure on the kwacha to depreciate,” reads the analysis in part.
In an interview Ecama president, Lorraine Nyasulu, said they will continue to monitor the situation as the pandemic is highly unpredictable.
Economic expert, Edward Chilima, concurred with the Ecama analysis, saying with lockdown in some countries, volume of imports declines significantly and should expect local production to decline over time.
“If this continues, we will start to see shortages of supplies, indeed potentially driving prices up as supply declines. As for the tobacco auction, let’s wait and see,” Chilima said.
In a separate interview, Reserve Bank of Malawi spokesperson, Mbane Ngwira, said that analysis was looking at the worst case scenario but the country is still receiving essential goods and trading within the country is ongoing.
“We will continue monitoring the situation. As of now, the measures put in place are giving us the predictions we provided and it is the same thing for the kwacha. The performance is still expected to be stable in the short to medium term. In the long term we will first monitor the situation as developments unfold,” Ngwira said.
Inflation went down to 11 percent in February 2020 while the Kwacha has been stable against the dollar at K734 and gained marginally against other currencies.