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Firm outlines key economic threats

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By William Kumwembe:

Investment management and advisory firm, Nico Asset Managers, has outlined key risks facing the Malawi economy, reiterating that they would disrupt development endeavours if unchecked.

The firm, in its April 2019 Economic Report, has identified rising public debt levels, insufficient power supply, persistent weak export base, high population growth rate, political instability and adverse weather conditions as likely risks facing the economy in second half of 2019.

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These, according to the firm, could have an adverse impact on economic growth strides for the country.

The report says, if goes unchecked, government debt levels would create a future obligation for the government to repay the debt plus interest.

Malawi’s central government debt stock rose by K177.4 billion in the fourth quarter of 2018, from K3.1 trillion in the third quarter, to K3.3 trillion, triggered by an upsurge in both domestic and foreign debt.

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Economic commentators rated the trend as unsustainable for Malawi’s economy, saying the speed at which the public debt is rising will affect economic growth.

On other factors, Nico said the persistent weak export base would continue affecting the kwacha’s stability against major currencies as import values exceed export values.

Nico also says population, now at 17.5 million, has to be checked.

“High population growth rate may reduce the country’s ability to allocate resources to more productive activities,” the report reads.

Nico says political instability may also result in industries and companies shutting down, leading to low labour productivity and disruption in revenue generation.

This may also lead to a decline in foreign investment, according to the report.

Meanwhile, the firm says the outlook remains positive for the economy.

Various institutions have projected that the Malawi economy will grow by an average of 4.50 percent in 2019, 5.18 percent in 2020 and 5.25 percent in 2021.

“A good agriculture output coupled with successful implementation of plans to diversify and expand cash crops could push the number upwards to 5.0 percent,” reads the report.

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