Investment advisory firm and economic commentators have warned that Malawians should brace for tough times ahead as the economy is still bound to suffer a great loss in the wake of Covid-19.
In its second quarter Economic Report, Alliance Capital Limited, says among other things, inflation is expected to exhibit marginal strength going forward with maize prices expected to relatively rise.
It further highlights that interest rates would remain elevated on the back of mounting government debt and low liquidity levels.
“The exchange rate, especially the kwacha-dollar rate is expected to remain stable in the short term but the Kwacha is expected to exhibit volatility with a weakening bias against the pound and rand,” reads the report in part.
In an interview Wednesday, economics professor at Chancellor College, Ben Kalua, said every year Malawi experience inflation increases in the third and last quarter.
“Malawi inflation starts rising in May but last month it was stable. Interest rates on the other side, does not remain stable when inflation is rising,” Kalua said.
UK-based Malawian economist, Sane Zuka, said in a separate interview that the effect of Covid-19 remains the major factor to determine the macroeconomic trends.
“This is so because of its effect on dampening economic activities that define the tax base. As Covid-19 will forces the government to depend more on consumption related taxes, cushioning mechanisms will play another important role,” Zuka said.
Recently, Reserve Bank of Malawi maintained a five percent inflation target by the end of first quarter of 2021.
The Central Bank maintains that inflation will average 8.8 percent in 2020.
In recent months Malawi has enjoyed a decline in inflation rate from 11.5 percent in December 2019 to 8.5 in May.