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MCCCI casts doubt on growth projections

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The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has expressed reservations that the local economy would have grown by 3.8 percent in 2021 as projected by the government, describing the business environment as harsh owing to effects of the Covid pandemic and local economic fluctuations.

This is contained in a report published by the chamber on Friday, titled ‘Assessment of The Business Environment in 2021, The Private Sector Perspective’.

MCCCI holds that the industry sector was faced with challenges such as high cost and inefficiency of telecommunication services, difficulties in access to finance, high cost of electricity, rising inflation, and a weak kwacha on top of the Covid pandemic.

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The report adds that local manufacturers were also faced with challenges due to difficulties in obtaining intermediate goods and other inputs caused by shortages of foreign currency in the country as well as supply chain disruptions associated with Covid restrictions.

“In the second half of 2021, the domestic economy registered macroeconomic imbalances on multiple fronts ranging from low production levels, supply disruptions, weak domestic demand, rising prices of goods and services as well as shortage of foreign currency.

“All these events undermined real economic transactions and it is very likely that the 3.8 percent growth of the economy projected by the government will not be achieved in 2021,” the report reads.

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The chamber has since said the New Year may also turn out to be difficult for businesses depending on the pathway of the Covid pandemic and weather patterns.

It believes that pandemic-induced supply-demand mismatches triggered inflation upwards and if these persist for much longer in 2022, it could force the Reserve Bank of Malawi to implement contractionary monetary policy to counter inflation.

“This could be done by reducing money supply and increasing interest rates which could prematurely bring to a halt monetary support towards the recovery of the economy,” the report adds.

Recently, President Lazarus Chakwera launched a two year socio economic recovery plan which aims at stabilising economic fundamentals and setting a foundation for medium and long term economic recovery.

In his speech, Chakwera admitted that the economy is bleeding but expressed hope that, with the recovery plan, the economy will gain ground and create a conducive environment for the private sector and citizens.

“The Recovery Plan is designed to give some the resilience to hang-in there during these hard times, give some the capacity to step-up production, and give others support to step-out into new sectors through diversification and value-addition. With the economic interventions we have effected so far this year, economic growth recovery for the year 2022 is already projected at over 5 percent of GDP,” he said.

Malawi is an importing and consuming agro-based economy which is easily affected by fluctuations on the international market.

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