Malawi’s external position improved slightly in the first three months of 2021 not necessarily buoyed by improved exports but a sharp decline in imports, the Reserve Bank of Malawi (RBM) has said.
In a statement on Thursday, the Monetary Policy Committee (MPC) of RBM says the values for both exports and imports declined in the first quarter, with imports declining more than exports, leading to the narrowing of the trade deficit.
The MPC says, specifically, import outlays declined by $60 million to $693.1 million while exports dropped by $2.7 million to $201.6 million in the same period.
“Thus, the trade deficit improved to $491.5 million in 2021 Q1 from $548.8 million in 2020 Q4.
“Prospects for the near-term suggest that the trade balance could improve, mainly due to increase in exports following the opening of the agricultural marketing season and a seasonal decline in imports of agricultural inputs,” the MPC says.
RBM says it expects international oil prices to increase in 2021. It says global oil prices averaged $60.6 per barrel in the first quarter of 2021, up from $44.5 per barrel in the fourth quarter of 2020.
“Prospects for the rest of the year indicate that oil prices will average $58.5 per barrel in 2021, representing an annual increase of 42.0 percent. The rise in global oil prices reflect the impact of restrained production by the Organisation of Petroleum Exporting Countries (Opec+) including Russia.
“According to the US Energy Information Administration, Brent crude oil prices are projected to average $65.0 per barrel in 2021Q2 as the rebound of economic activity during the quarter, upon easing of the Covid lockdown restrictions, is expected to induce rising global demand for the commodity,” the statement says.
In 2022, oil prices are expected to moderate to an annual average of $54.8 per barrel and remain unchanged, in real terms, over the medium term.
The central bank further says it expects domestic economic activity to moderately pick up in 2021.
“The Covid pandemic continues to weigh heavily on economic activity in Malawi. Nevertheless, the ongoing vaccination campaign, coupled with the above average agricultural production during the 2020/21 season as well as the recovery of the global economy, provide optimism for economic turnaround.
“As such, domestic real economic growth is projected to strengthen to 3.8 percent in 2021, from an estimated growth rate of 0.9 percent in 2020,” the statement says.