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Pessimism on 2019 economic outlook

By William Kumwembe:

Commentators say Malawi’s economic outlook remains mixed and murky with some prevailing macro-economic challenges likely to persist.

The view comes as the World Bank predicted that the local economy would swell by 4.1 percent in 2019, an improvement from an estimated 3.5 percent growth in 2018.

However, the growth is dependent on weather patterns that affect agricultural output which accounts for more than 25 percent of the Gross Domestic Product.

Currently, Malawi is facing some inflationary pressures from rising electricity and water tariffs and increases in fuel prices.

Malawi’s headline inflation crawled back to the double digit lane in November, inching up by 0.4 percentage points to 10.1 percent.

The development means Malawi only managed to sustain single digit inflation for 15 months after falling to 9.3 percent in August 2017.

Food inflation went up to 10.8 percent from 10.4 percent while non-food inflation stood at 9.5 percent from 9.2 percent in October.

In the past two months fuel prices went up by an average of 10 percent and this forced service providers, including transporters, to reciprocate by pushing up their prices.

In October, the Electricity Supply Corporation of Malawi effected a 20 percent power tariff increase as part of a 31.8 percent four-year tariff hike approval by the Malawi Energy Regulatory Authority.

Prices of maize, Malawi’s staple grain that traditionally impacts the country’s economy given its skewed influence in determining inflation rates as it makes up more than 45.2 percent in the Consumer Price Index, have also remained elevated in recent months.

In its November 2018 Monthly Economic Report, investment management and advisory firm, Nico Asset Managers outlined key risks facing the economy in December 2018 and beyond.

The firm reiterated that the threats which include high debt levels, insufficient power supply, banking sector risks, adverse weather and persistent weak export would distrust development endeavours in the year.

“Weather- induced shocks could lower agricultural output thereby bringing about an increase in the price of critical crops such as maize,” reads the report in part.

In an interview Tuesday, economic commentator and Dean of Social Sciences at the Catholic University, Gilbert Kachamba, however, said not all is lost for the future.

“The economic future looks good, at least for now, the rains looks ok with our ever agro-based economy, the Kwacha has been stable for quite some time, interest rates are quite better all these give hope for a better future though there are some areas to touch on like the energy sector,” Kachamba said.

Malawi’s weak and volatile economic growth performance has persisted in the recent years amid optimism from authorities.

The government projected a six percent economic growth in 2019.

But trend in the past ten years has shown that 10 government normally revise downward its growth projections in the course of the year.

Largely, the revisions are mainly based on agricultural output mostly due to the effects of climate change.

The country’s economy is agro-based, highly dependent on rain-fed agriculture and the sector is not resilient to climatic shocks such as drought and dry spells.

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