Economic think-tank, the Economics Association of Malawi (Ecama) and the Malawi Confederation of Chambers of Commerce and Industry (MCCCI)— an umbrella body for private sector players— have rated first half of 2023 as a mixed bag as the economy remained volatile, albeit showing signs of recovery in some sectors.
From January 2023, the local economy has been faced with myriad problems emanating from exogenous shocks, harsh weather conditions and structural challenges.
Among other things, in the first half of the year, the local economy’s footing was shaken by Cyclone Freddy, fuel and foreign exchange shortages, the cholera pandemic and inadequate electricity supply.
Almost all macroeconomic indicators remained in red: Inflation—the rate at which commodity prices change at a given time in an economy—went up by 3.3 percentage points to 29.2 percent in May from 25.9 percent recorded in January.
And the Reserve Bank of Malawi (RBM) forecasts the general rise in prices to average 24.5 percent from an earlier prediction of 18 percent.
On the other end, the local unit, the Kwacha, lost about 2.68 percent value against the dollar.
Within the period under review, the RBM also adjusted upwards its policy rate—the rate at which commercial banks use when borrowing from the central bank as lender of last resort— from 18 percent to 22 percent, and commercial banks reciprocated by raising their interest rates.
Giving an analysis of the year to date in an interview Tuesday, Ecama Executive Director Frank Chikuta said the local economy remains susceptible to more shocks.
He cited continued rising public debt, coupled with a squeeze in the fiscal space piled more pressure on the government.
“Cyclone Freddy is probably the most significant shock to have affected the economy during the first half of 2023 and it disrupted the recovery efforts from the prior shocks.
“The outlook for the second half of the year will depend on successful negotiations to restructure the country’s debt, qualification for the Extended Credit Facility (ECF) which will give respite to the foreign exchange shortage, and the effectiveness of monetary policy to rein in inflation,” Chikuta said.
In a separate interview, MCCCI President Lekani Katandula said there was improved performance in some sectors of the economy following good tidings registered by some listed firms.
“The second half looks promising. We only hope that the reported progress will be sustained and we can avoid the recurrence of diesel and petrol shortages,” Katandula said.
A recent RBM report indicates that the country’s manufacturing sector is expected to grow by a meager one percent in 2023, down from the estimated 1.9 percent last year.
The mixed performance comes at a time Malawi has embarked on an ambitious journey of becoming a lower middle-income economy by 2030 as espoused in the first 10-year Malawi Implementation Plan of Malawi 2063.
