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Firm says economic outlook still mixed

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Edward Chilima

Investment management and advisory firm, Alliance Capital Limited says economic outlook remains mixed and murky as effects of Covid-19 are still being felt in most sectors.

In its Quarterly Economic Report for second quarter of 2020, the firm says the pandemic has weighed down the economy through loss of trade and tourism, dwindling remittances, subdued capital flows and tight financial conditions amid mounting public debt.

“The major worry at this point is that the surge in Covid-19 cases will mount pressure on our already weak health care systems. This will present a very big challenge,” reads part of the report.

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It predicts that inflation would marginally strengthen as maize prices are expected to relatively rise on the market as the harvesting seasons is going on.

According to the report, interest rates are also expected to remain elevated on the back of mounting government debt and low liquidity levels.

The exchange rate, the kwacha-dollar rate is expected to remain stable in the short term but the Kwacha is expected to exhibit volitality with weakening bias against the pound and rand.

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The firm further says with lockdown in some countries, closing of borders and banning of air travel, economies have halted which has had a bearing on trade between Malawi and other countries.

In the report, Alliance Capital Limited then recommended that Malawi finds a niche in which it can provide differentiated products and hold its own economic ground considering size.

“It may not have the ability to take on the global market directly, hence the need to find a niche. It just has to make products—not just raw materials like tobacco— that it can sale within and to the world,” reads the review in part.

Speaking in earlier interview, Small and Medium Enterprises Development Institute (Smedi) said a lot of Small and Medium Enterprises (SMEs) have great potential to develop a niche but they lack capital.

Economic Expert and former Economists Association of Malawi (Ecama) Executive Director, Edward Chilima said in an interview that Malawi has a huge advantage to turn agricultural products into finished products for global market.

“We cannot abandon agriculture but we just need to go a step further to look at which products we can add value but we also need to look at other areas where we can explore such as minerals which the country has,” Chilima said.

The Ministry of Finance recently indicated that the economy is projected to lose about K244 billion in nominal gross domestic product (GDP) or 3.5 percent of GDP if the pandemic is contained by the second quarter of the 2020/2021 financial year.

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