The World Bank has estimated that Malawi’s imports shrunk by 26 percent in April and May 2020 compared to the same period last year as the economy continues to absorb negative impacts of Coronavirus disease (Covid-19).
The bank, in its latest biannual publication, the Malawi Economic Monitor (MEM), also observes that the pandemic has significantly increased the country’s trade and logistics costs, saying the flow of goods through Malawi’s borders and those of its key trade partners is being affected by frequent transit stoppage, lack of personal protective equipment (PPE) for border officials, and higher cost of air cargo.
The 11th edition of the MEM, which was virtually launched last Friday in Lilongwe, is titled From Crisis Response to a Strong Recovery and provides latest analysis of both economic and structural development issues in Malawi.
“Malawi Revenue Authority (MRA) customs data suggest that imports were 26 percent lower in April and May 2020 than in the same period last year (based on value for duty purposes estimates). Increased trade logistics costs and delays are also affecting the flow of goods through borders,” says the bank.
Informal imports coming from Mozambique and Zambia have also reportedly decreased, World Bank says.
Currently, global value chains, especially the importation of key production inputs, have been severely disrupted as social distancing has largely affected output from industry.
Commenting on exports, the bank observes that lower global demand and trade restrictions in the wake of the pandemic are expected to weigh on Malawi’s export products which it says are currently facing severe recessions.
Malawi exports an estimated 32 percent of its exports to the European Union (EU), 10 percent to South Africa and 26 percent to the rest of Africa.
“However, as Malawi’s main exports are tobacco (over 50 percent), sugar, and tea, global demand for these products has been relatively inelastic in the past decade, mainly affected by supply shocks and changes in contracts, so that the impact may be somewhat mitigated.
However, the tobacco auction season through early July has seen a decrease in sales, with a 11.9 percent reduction in sales values, due to a 14.7 percent reduction in volumes partially offset by a 3.2 percent increase in average price.”
Touching on tourism, World Bank notes that the flow of visitors into Malawi has effectively come to a standstill, with increased risk aversion and travel bans combining with Malawi closing its international airports since the beginning of April.
According to the World Tourism Organisation, 870 000 tourists visited Malawi in 2018 but the figure is expected to drastically plummet this year, according to tourism industry stakeholders.
Remittances through money transfer have also decreased by 57 percent in April.
In an interview yesterday, Minister of Trade Sosten Gwengwe admitted that Covid-19 has slowed down trade links between Malawi and the rest of the world but said government is putting up several initiatives to cushion the situation.
Said Gwengwe: “We are enhancing trade facilitation with the neighboring countries and this is vital amid Covid-19. We would like to facilitate cross-border trade while ensuring safety or safe passage of goods. We are working with several partners on this project.”
World Bank new country manager for Malawi Hugh Riddell said on Friday that pre-Covid-19, Malawi was pursuing its third consecutive year of solid growth but said such a track record is under threat due to reduced demand and disrupted supply chains, declining tourism and remittances, depressed household consumption as well as the cutting back on investments by businesses.