Continued depreciation of the Kwacha, high inflation and fiscal slippages have been outlined among key risks still haunting the local economy and with potential to derail chances of recovery in the short to medium terms.
This is contained in the September Economic Report issued last week by local investment management and financial advisory firm, Bridgepath Capital Limited.
Other risks which have potential to affect economic growth strides in the long-run, according to the firm, include unfavourable weather and energy woes.
“Further, a protracted Covid pandemic will exacerbate these risks,” says Bridgepath Capital Limited.
It warns of a possible surge in inflation in the coming months as there is still a high risk of a pick-up in food prices.
Headline inflation remained on a downward spiral in August 2021, easing by 0.4 percentage points to 8.3 percent, albeit a reported surge in food prices, especially maize.
But Bridgepath Capital Limited projects that food inflation may start trending upwards due to the increase in the maize price despite a bumper harvest in the previous agriculture season.
Since July, inflation has been going down after rising to 9.1 percent in June, from 8.9 percent in the preceding month.
However, year-on-year, the August headline inflation rate was higher than the 7.0 percent recorded in August 2020.
Commenting on volatility of the local unit, the Kwacha, the firm said currency could remain under pressure, losing grip on major trading currencies especially the United States dollar as forex demand-and-supply imbalances persist.
As at Friday last week, the Kwacha was trading at K824 to a dollar, from K823 the previous week.
On average, in September 2021, the Kwacha was trading at K820 to a dollar from K818 in August, K1,049 from K1,041 against the Euro, and K60 from K59 against the Rand in previous months.
The firm also says that protracted Covid pandemic was likely to increase the fiscal deficit through the government’s allocation of resources to mitigate effects of the pandemic.