Malawi’s current account deficit is estimated to rise to 18.4 percent of the gross domestic product (GDP), an indication that the country’s exports were dwarfed by imports, according to the World Bank latest report.
A current account balance is the net of the balance of trade, factor income and cash transfers. The World Bank Global Economic Prospects January 2014 report released this week further indicates that Malawi’s current account deficit worsened from 13.6 percent of the country’s GDP in 2011 to 15 percent in 2012. The balance is projected to improve to 14.7 percent in 2015.
Economists generally note that if a country is running a current account deficit, it is actually consuming more than it is producing and this may happen if other economies are lending their savings to it in terms of debt or investments.
Experts also say where a country runs a current account deficit, the economy may be running down its foreign assets such as official foreign currency reserves.
The Reserve Bank of Malawi (RBM), in its latest Financial and Economic Review, noted that the country’s overall balance of payments (BOP) position—a net of all monetary transactions, as measured by the change in net international reserves is projected to register a surplus of $250.6 million (K98 billion) in 2013 from a deficit of $25.3 million (K6.3 billion) in 2012 premised on increased donor inflows estimated at $347.8 million in 2013.
The RBM said projections indicate relatively higher positive growth rates than those obtained in 2012 for all industries except for mining and quarrying, real estate and other services, which are estimated to register relatively lower growth rates than in the preceding year.
It said that agriculture activity—the country’s main export—is estimated to grow by 6.1 percent in 2013 following a contraction of 2.3 percent in 2012. The expansion is attributed to an increase of over 100 percent in tobacco production from 79.8 million kilogrammes to 168.7 million kilogrammes.
Malawi generally experiences trade deficits with the rest of the world.
According to available statistics, Malawi’s exports are projected at $1.4 billion (K616 billion) by end of 2013 while imports are estimated at $2.5 billion (K1.1 trillion) leading to a deficit of $1.1 billion (K484 billion).
But Malawi is implementing the National Export Strategy (NES) aimed at providing a roadmap for building the country’s productive base to generate sufficient exports to match the upward pressure of imports. The strategy also aims to maximise the direct contribution of exports to economic and social development.