Investment advisory firm Nico Asset Managers has warned that the economy faces downside risks due to the Covid-19 pandemic, weather shocks and fiscal slippages.
In its Mid-Year Economic Report released on Friday, the firm said the global pandemic poses a huge downside risk to the economy which could trigger a recession.
It said the pandemic could further slow and reduce demand for exports, slow imports and raise their cost. It will also reduce public and private investment.
Reads the report in part: “Additionally, if the virus continues to spread extensively as at the current rate, it could severely disrupt the labour force thereby increasing poverty. This can further weigh on investment and reduce reform momentum.”
The pandemic is affecting the country through spillovers from the changes in the global environment and the impact of the domestic outbreak.
The firm further expects the fiscal deficit to widen marginally in 2020/21 as welfare measures to mitigate the impact of the outbreak keep spending elevated.
Currently, a fiscal deficit of K632.10 billion is projected for the 2020/2021 fiscal year, representing 10.1 percent of the gross domestic product.
Weighing in on the report, economic statistician Alick Nyasulu said the economy should expect tough times ahead as a result of the global pandemic.
On his part, Chancellor College economics professor Ben Kaluwa, in an interview yesterday, said the country faces more pressure as the pandemic continues to spread at a fast rate.
Meanwhile, Economist Intelligence Unit, a research and analysis division of the Economist Group, has revised downwards Malawi’s economic projection from 4.4 percent to negative 3.3 percent in 2020 due to the impact of Covid-19.