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Firm outlines economic threats

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Portfolio and investment management firm Nico Asset Managers Limited has outlined six key risks that could further stifle Malawi’s growth and development endeavour.

The firm, in its July 2016 monthly economic brief has highlighted insufficient power supply, high interest rates, persistent weak export base, high inflation rates and delay in food assistance as likely risks to the economy which could impact the real Gross Domestic Product (GDP) growth estimated at 5.1 percent this year by the Government.

This also comes a few days after the Reserve Bank of Malawi (RBM) said in 2015 Annual Review that Malawi’s economic outlook remains mixed and murky with prevailing macro-economic challenges likely to persist.

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On the food situation, Nico says the delay in food assistance or procurement of additional maize to cover up the 493,000 metric tonnes deficit may add inflationary pressure which is likely to increase in August 2016 and beyond.

“This lowers the disposable income of households which would otherwise be used for savings and investment. It also lowers the real return on savings and investment,” said the firm.

The Economic Intelligence Unit expects inflation to average 23.50 percent in 2016 and currently it stands at 22.60 percent.

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On banking sector risk, Nico Asset Managers, a subsidiary of Malawi Stock Exchange listed Nico Holdings Limited said high interest rates may lead to loan defaults and slowdown in private sector investment.

Nico also said persistent weak export base may affect the stability of the local unit, the kwacha, against major currencies as import values exceed export values.

“The kwacha is expected to continue depreciating as a result of low inflow of foreign currency due to poor performance of the tobacco market, weak exports and low levels of foreign direct investment,” warns Nico.

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