The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has highlighted key threats to economic growth in 2023 which it fears could further affect real gross domestic product (GDP) next year if not addressed.
The shocks include shortage of foreign exchange, which led to scarcity of fuel and other essential commodities, misalignment of the Kwacha, high inflation and weather-related shocks.
In its 2023 Business Assessment report issued recently, the chamber says the operating environment was characterised by myriad challenges that made it difficult for private sector players to thrive during the year.
It says, among other things, forex scarcity, which emanated from prevailing imbalances between demand and supply, negatively affected the operations of both local and international cross-border businesses.
Figures provided show that during the year under review, the highest recorded import cover was 1.29 months which is way below the recommended target of three months.
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“The foreign exchange scarcity made it hard for businesses to import raw materials and essential goods. The shortage of foreign exchange led to two main problems which impeded business performance, namely misaligned currency and scarcity of fuel,” the report reads.
The forex scarcity also piled pressure on the local unit, the Kwacha, and led to thriving of a parallel market and this brought in the misalignment of the value of the currency between the official and black markets.
In its assessment, the industry mouth[1]piece also laments higher inflation levels which affected businesses negatively by raising production costs and reducing aggregate demand through the erosion of consumers’ disposable income.
“The cost of production increased in the year due to rocketing prices of raw materials and the massive impacts on wages.
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“This created a situation whereby the businesses were producing at higher cost but could not substantially raise prices fearing reduced demand for their products or services,” MCCCI says in the report.
Due to the prevailing challenges, the Reserve Bank of Malawi revised downwards Malawi’s real gross domestic product growth projection for 2023 to 1.5 percent, from the earlier estimate of 1.9.
