Firm outlines key economic threats
Local investment management and financial advisory firm, Bridgepath Capital Limited, has outlined key threats facing the economy which it says could stifle growth chances if not addressed.
In its April Monthly Economic report issued last week, over dependence on rain-fed agriculture, foreign exchange scarcity, currency depreciation risk, heavy reliance on aid and insufficient power supply among challenges needing urgent attention.
The report says if not addressed, the challenges would affect strides towards the realisation of medium-term economic growth target and worsen poverty levels.
“Malawi has a relatively underdeveloped financial sector, with limited access to credit and other financial services for many individuals and businesses.
“This can make it difficult for companies to expand and invest in new projects, limiting economic growth,” the report reads.
For years, the Malawi economy has been susceptible to myriad shocks emanating from Covid pandemic, harsh weather conditions and effects of the Russo-Ukrainian War.
Both the monetary and fiscal authorities have admitted that the challenges threaten growth prospects.
Two weeks ago, the Reserve Bank of Malawi Governor Wilson Banda said in 2023, the economy is expected to grow by 1.7 percent, down from a 2.7 percent earlier gross domestic product growth projected.
Banda said the revised projection comes in the aftermath of Cyclone Freddy which is poised to affect agriculture output.
“The economy is also faced with continued low supply of foreign exchange exacerbated by the war in Ukraine. We anticipated a slowdown in inflation in 2023 but due to these factors inflation is likely to remain with us in the short term,” Banda said.
Last week, the RBM’s Monetary Policy Committee also hiked the Policy rate by 400 basis points from 18 to 22 percent a thing which is expect to pile more pressure on borrowers of money from commercial banks and other money lending institutions
Traditionally, a hike in the policy rate fuels a jump in interests that banks charge on their loan products.
On the other end, the International Monetary Fund expects sluggish growth in Malawi and most of its regional counterparts as activity is expected to decelerate for a second year in a row.
The IMF says persistent global inflation and tighter monetary policies have led to higher borrowing costs for sub-Saharan African countries and have placed greater pressure on exchange rates.
It says the funding squeeze aggravates a protracted trend that has been years in the making.
It says public debt and inflation are at levels not seen in decades, with double-digit inflation present in half of countries—eroding household purchasing power, striking at the most vulnerable, and adding to social pressures.
Malawi remains among the poorest countries in the world.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
He is however flexible as he also writes about current affairs and national issues.