Economic forecasters predict tough 2021

Poor tax revenue, resurgence of the novel coronavirus (Covid-19) and uncertainty over direct donor aid threaten government’s bid to create employment, improve infrastructure and food security, forecasters have said.

The country will this Friday join the rest of the world in slamming the door to 2020, and welcoming the New Year, 2021.

The year just-ending has been a difficult one, dominated by Covid-19.

Among other things, the pandemic disrupted the health sector; caused job losses and, on a more general scale, damaged the economy as lockdowns and travel restrictions around the world meant Malawi, a largely consuming nation, could not import much.

However, while the turn of the New Year always offers hope for a new beginning, forecasters say, to the contrary, signs point to another difficult year ahead.

But Ministry of Finance spokesperson Williams Banda yesterday said they are working on the 2020/21 Mid-Year Budget Review report, which will paint a picture of the new year’s economic situation.

“We respect their [analysts] views, hoping they did some analysis. We will give our view after finalising our report,” he said.

In an interview on Wednesday, development economist Milwad Tobias observed that the 2020/21 National Budget is not being adequately funded due to poor revenue earnings.

He feared this will continue in 2021 as businesses are still struggling following job losses and travel restrictions due to Covid-19.

Last week, Malawi closed its borders after Covid-19 confirmed cases jumped 75 percent in the past two weeks.  Authorities attribute the surge to relaxed preventive measures and increased cross-border traffic for the festive season holidays. 

Said Tobias, who is executive director of Centre for Research and Consultancy: “Most businesses thrive on imports and when borders are closed, they struggle. This means a blow to government, because the import duty base also suffers.

“Again, there have been job losses leading to tax losses. In the coming year, government will continue to struggle to finance the budget due to poor revenue collection.”

He added that government’s financial struggles “shall mean less investment in infrastructure development, an industry that creates substantial employment”.

On his part, former minister of Finance Joseph Mwanamvekha said recent fuel price adjustments, shortage of foreign exchange and lack of major donor support spell tough times for the country in 2021.

Mwanamvekha, who is the former ruling Democratic Progressive Party finance spokesperson in Parliament, said: “You will notice that forex reserves are depleted. As a result, the Reserve Bank is failing to support the market. That is why you have seen the kwacha depreciating. This means that prices of goods and services are going up.

“The fuel price increase also means that prices for goods and services will also go up. In a nutshell, 2020 has been a bad year and going forward, I also see gloom.”

The predicted economic struggles in the coming year are also backed by the Assessment of the Impact of Covid-19 on Employment in Malawi, which the Employers Consultative Association of Malawi (Ecama) and the International Labour Organisation published in June this year.

The assessment projected that the country’s economy would suffer significant losses once Covid-19 is untamed by next year.

“If the pandemic persists into the first-quarter of 2021, our projections show that approximately K224 billion which is equivalent to K1.38 trillion in nominal terms, would be lost,” the report reads, in part.

In an interview yesterday, Ecama executive director George Khaki said the economic picture was looking promising until Covid-19 resurgence in Malawi and globally.

“Now, we are seeing the resurgence of Covid-19 and many of our major trading partners in Europe and South Africa are going to lockdowns. What this means is that we will end up riding back on the gains that we achieved,” he explained.