Local economy remains volatile

Ben Kalua

Key macroeconomic fundamentals remained volatile in the first quarter of 2021, a situation economists attribute to effects of the Covid pandemic.

Experts say the situation may worsen if the third Covid wave persists.

For instance, figures from the Reserve Bank of Malawi (RBM) show that official foreign exchange reserves were estimated at $402.1 million (1.9 months of imports) compared to $565.5 million (2.7 months of imports) recorded at the end of the preceding quarter and $773.2 million (3.7 months of imports) in the corresponding period in 2020.


The Kwacha depreciated by 2.2 percent and traded at K790.30 per US dollar and the local currency lost value by 4.2 percent and 0.02 percent against the British Pound and Euro, respectively, and traded at K1, 139.62 per Pound and K993.04 per Euro.

Inflation also increased in the period under review as headline inflation stood at 8.5 percent from an average of 7.5 percent recorded in the preceding quarter.

RBM is, however, optimistic that the economy will grow for the rest of the year, adding that 2021 growth prospects are reflective of the pick-up in economic activity in the domestic economy as well as major trading partners following the global roll-out of Covid vaccinations in order to contain the virus.


“The resultant positive demand and supply shocks prove to be favourable to most sectors of the economy. In particular, the accommodation and food sector, transportation, wholesale and retail and manufacturing sectors,” reads the report.

Malawi University of Business and Applied Sciences economist Betchani Tchereni said, under normal circumstances, the economy should be expected to bounce back.

University of Malawi Professor of Economics Ben Kalua said the country should not expect the economy to pick up soon.

“Things are not fine and there have been announcements of closure of borders again for Malawi and South Africa which is our major trading partner. So we do not know how long it will take but it will eventually affect the economy,” Kalua said.

Delivering the national budget in Parliament two weeks ago, Finance Minister Felix Mlusu projected that real GDP will rebound to 3.8 percent in 2021 from the subdued growth of 0.9 percent in 2020.

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