‘Local economy remains volatile’
As firm outlines risks
Local financial advisory firm, Bridgepath Capital Limited, has said the economy continues facing myriad risks which could stifle chances for stability and sustainable growth in the short to medium terms.
In its Monthly Economic Review for January, the firm outlined continued volatility of the Kwacha, high inflation and fiscal slippages among key risks still haunting the local economy.
Other risks which have potential to affect economic growth strides in the long run, according to the firm, include unfavourable weather and energy woes.
The report indicates that the economy’s heavy dependence on rain-fed agriculture, expected water and electricity tariff hikes in 2023, further exchange rate risk compounded by global inflationary pressure, and power supply insufficiency, are key on the list of challenges.
“The country risks lower agricultural yields in the current agricultural season due to high fertiliser prices and challenges that have been faced in the implementation of this season’s Affordable Inputs Subsidy Programme (AIP),” the report reads.
But monetary policy authorities feel while the economic outlook has materially improved, after a sharper-than expected slowdown last year, maintaining a tight monetary policy stance would help other prevailing pressure points.
In a statement after its first 2023 Monetary Policy Committee meeting last week, the Reserve Bank of Malawi says the outlook remains mixed as an elevated inflation risk is still imminent.
“Despite this optimism, the committee noted that inflation was likely to remain in double digits in 2023, making it unconducive to support economic growth.
“At the same time, the MPC opined that loosening monetary policy in a double-digit inflationary environment could reverse the expected downward inflation path,” the statement reads.
Malawi Confederation of Chambers of Commerce and Industry Chief Executive Officer Chancellor Kaferapanjira also expressed optimism that the economy is expected to improve going forward.
“If we can succeed in securing the Extended Credit Facility, and the rains have been good, which means we are likely to have a good agricultural season, we may see a sharp decline in some of the things that have affected the economy such as the rising inflation rate,” Kaferapanjira.
The RBM has since revised downwards its annual headline inflation target to 18.2 percent from 21.5 percent on the back of expected good agricultural output this season.
The International Monetary Fund projects Malawi’s headline inflation to average 20.8 percent this year and 22.7 percent in 2023.
Comparatively, the Treasury projects annual average inflation to rise to around 21.5 percent from 9.3 percent registered in 2021.
In 2023, according to government estimates, headline inflation is projected to stabilise at an average of 21.8 percent before it starts to decline thereafter.
Industry captains feel the country’s economy is not out of the murky terrain yet.
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.