Current account deficit to widen—Nico Asset
Malawi’s current account deficit is expected to widen in the next two years as imports and global fuel prices continue to rise, an investment advisory firm has said.
In its Economic Review for November 2020, Nico Asset Managers said the current account deficit—a measure of a country’s trade in which imports surpass exports—is expected to widen from 16.8 percent of gross domestic product to 17.8 percent in the next two years.
Reads the report in part: “However, the forecasts are contingent on normal rainfall patterns and any major disruption would prompt a downward revision to agricultural exports and an upward revision to food imports, causing the deficit to widen.”
The firm said although export earnings are forecast to increase from next year amid a gradual recovery in external demand, import spending is projected to pick up and trade balance will likely remain in structural deficit due to the country’s dependence on fuel and capital imports.
Figures from the Reserve Bank of Malawi show that the country recorded a trade deficit $1.5 billion (about K1.1 trillion) during the first nine months of 2020 compared to a deficit of $1.1 billion (K874 billion) recorded in the corresponding period in 2019.
In an interview yesterday, economist Edward Chilima said Malawi’s negative trade balance will continue to widen if the country does not invest in productive sectors to boost exports.
“We need to seriously industrialise the economy so that we produce goods for the export market. We should also be serious in terms of import substitution,” he said.
