Malawi Confederation of Chambers of Commerce and Industry (MCCCI) says trade balance in the short to medium-term will worsen owing to continued inadequate exports.
Figures from the Reserve Bank of Malawi (RBM) show that the trade balance continued to widen at the start of the third quarter this year as exports declined by 1.9 percent to $77.3 million (about K58 billion) while imports increased by 7.8 percent to $308.2 million (about K231 billion).
In its October Economic Review Report, the private sector lobby group said the solution to the widening trade imbalance lies in the country implementing an import substitution strategy for certain products to reduce imports and ultimately ease pressure on foreign currency.
MCCCI said the successful import substitution can be achieved in the short-run by targeting local industries that do not require a lot of investment and relying too much on imported raw materials.
In an interview yesterday, MCCCI head of membership development and communication Tione Kafumbu said the private sector fears that if the trade imbalance is not addressed, the domestic economy could register further output losses than anticipated.
He said the private sector anticipated the economic activity would improve in the second half of 2020, but looking at the current trajectory of events in the domestic economy and abroad, it is likely that output losses will be much worse than anticipated.
Said Kafumbu: “As long as pandemic-related restrictions remain in place, output loss in the services sector will likely be big and will only get worse.
“This is not good news for the domestic economy as the services sector has proven to be an important driver of the country’s gross domestic product [GDP] growth prospects.”
The MCCCI analysis shows that in the advent of Covid-19, the services sector GDP contribution has been steadily rising while industry and agriculture contribution has stalled.
It also finds that in the short-run, it is difficult to achieve increases in value-addition in industry and agriculture because it requires economic structural adjustments and significant investment.
In a written response yesterday, Centre for Research and Consultancy director Milward Tobias said the country needs to consider the post- Covid-19 recovery much earlier because the global pandemic is both a health and economic crisis.
He expressed concern that the K2.2 trillion 2020/21 National Budget was insensitive to the economic effects of Covid-19, saying the fiscal plan does not have measures to stimulate the economy.
In relation to Covid-19 losses, the National Planning Commission (NPC) with technical support from Limestone Analytics has been conducting a scenario planning study to identify an effective policy response and economic recovery strategies of Covid-19 for the country for the next five years.
NPC said the study intends to come up with scientific evidence on how the country will look like in 2025 given the availability of resources and the state of economic recovery from the Covid-19 pandemic.
“The outcome of the analyses shall, among other things, inform the development of Malawi’s Covid-19 Recovery Plan,” reads the statement in part.