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Firm outlines economic risks

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Malawi continues to face downward risks posing a threat to economic recovery and growth, local advisory firm Bridgepath Capital Limited has said.

This comes at a time both the World Bank and the International Monetary Fund have revised downwards their economic growth projections for Malawi.

In its April 2022 Economic Report, Bridgepath Capital Limited outlines myriad risks facing the local economy, which, if not checked, could frustrate the recovery process.

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They include weather-related shocks which continue to affect agricultural productivity.

According to the report, other main risks the country faces are cessation of financing from regional development banks, depreciation of the Kwacha, higher inflation, lower than anticipated agricultural productivity, new waves of infections of Covid, and inadequate power supply.

“Although Malawi experienced lower domestic food prices due to a strong harvest in the immediate previous agricultural season, exchange rate depreciation and inflationary trends on imported commodities emanating from global supply chain disruptions would put upward pressure on the country’s already elevated fiscal deficit,” the report reads.

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The firm says agricultural productivity is expected to be lower this year on a number of accounts including hitches in Affordable Inputs Programme implementation and tropical storms which the country faced.

“Compounding these risks is power supply insufficiency. The current electricity production capacity remains below the level of national demand. Furthermore, the tropical storm Ana caused damage to some national electricity generation stations enhancing the gap between electricity demand and supply,” the report reads.

Economics Association of Malawi (Ecama) believes that the country’s economy, in its current state is not resilient enough to see itself through the risks if they materialise.

Ecama Executive Director Frank Chikuta said the solution to the aforementioned risks is the formulation of measures that can cushion the country in the medium to long term, which is possible.

“Our agricultural sector is subjected to weather shocks because of overdependence on rain-fed agriculture. Therefore, government should bring measures such as irrigation farming in the medium to long run.

“On inflation, the Monitory Policy Committee has moved to control it by tightening the policy rate to ease rising inflation,” he said.

Recently, Reserve Bank of Malawi Monitory Policy Committee adjusted upwards the policy rate from 12 percent to 14 percent, a move which has seen lending rates going up as well.

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