National Bank of Malawi says it expects Gross Domestic Product (GDP) to grow by 2.6 percent this year and the bank has based its estimate on continued effects of the El Nino weather conditions.
NBM’s economic growth projection is 2.5 percentage points shy of the 5.1 percent predicted by President Peter Mutharika when he delivered his State of the Nation Address in Parliament in May.
In its interim financial results for the half year ended June 30, 2016, NBM says estimates point to a drop in maize production of at least 12 percent in the 2015 to 2016 season on the back of an already low 2014 to 2015 base.
“The low economic growth prospects will continue to have negative implications on effective customer demand and therefore business activity,” reads a summary of the results signed by directors Matthews Chikaonda, George Partridge, and Macfussy Kawawa.
The bank says the sustained increase in maize and cereal prices coupled with pass through effects of the kwacha depreciation will continue to push up inflation which was recorded at 22.6 percent in June, 2016.
“Currently, high foreign exchange demand is outstripping supply despite the ongoing tobacco export receipts in the first half of the year. This is resulting in the gradual depreciation of the kwacha. The forecast of the second half of the year, therefore, points to the continuation of the challenging environment,” NBM said in the statement.
During the first six months of the year, NBM group posted a pretax profit of K11.8 billion which is similar to the amount posted during the same time in 2015.
According to NBM, this year’s profit took into account one-off integration costs following acquisition of Indebank.
“Among the intergration costs, the bank incurred a severance pay amounting to K937 million. In addition, Indebank continued to incur unplanned overheads due to delays in obtaining certain regulatory approvals which resulted in losses amounting to K400 million,” says NBM.