The Reserve Bank of Malawi (RBM) says the country’s economic outlook is sketchy in view of the rising Covid-19 cases.
In its April Market Intelligence Report issued on Tuesday, RBM says, the rising cases of Covid-19 will negatively affect the economy in the near future.
According to the bank the domestic economy’s outlook largely depends on the availability and access of Covid-19 vaccines as this is key to ensuring sustained economic recovery.
Reads the report: “The outlook for the domestic economy mainly hinges on the impact of the looming third wave of the Covid-19 pandemic.
“The number of Covid-19 infections continues to increase, which may force the government to reinstate restrictions for Covid-19 prevention, thereby affecting economic activities.”
Malawi’s economy has been heavily affected by the Covid-19 pandemic with growth recorded at 0.9 percent in 2020 and projected at 3.8 percent in 2021.
Since last year, businesses and individuals have been suffering great losses as the global and domestic factors emanating from the pandemic affected and continued to affect Malawi’s economy, including disruption in global value chains and trade; logistics and a decrease in tourism and remittances..
Currently on the domestic front, developments in key economic indicators have been mixed where while the exchange rate has continued to depreciate against most of the country’s trading partners’ currencies, the inflation rate on the other hand has continued to ease.
In May, for instance, the kwacha lost 0.3 percent against the dollar and is annually recorded to have lost 7.8 percent against the dollar.
On the other hand, the inflation rate decelerated for the second straight month to 8.9 percent in May 2021 from 9.2 percent in the previous month.
In an interview on Tuesday, Economists Association of Malawi president Lauryn Nyasulu admitted that the economy will be affected as Covid-19 cases rise.
She noted that even without the local restrictions, some of the country’s trading partners have already started imposing restrictions, a development which affects the economy.
Nyasulu said: “The disruptions in international trade impose negative effects on the current account and revenue collection. On the other hand, the slowdown in business activity and reduced production because of disrupted supply chains and difficulties in doing business under Covid-19 restrictions is also affecting the economy.”
She said with these potential challenges, economic growth may not be as projected.
Meanwhile, the private sector task force on Covid-19 has also indicated that the looming third wave of Covid-19 pose a challenge to businesses .
But Minister of Finance Felix Mlusu, upbeat about the country registering positive economic growth and outlook, banking on the normal to above normal rains, despite risks emanating from the Covid-19 pandemic.
While admitting that the economy continues to suffer from the adverse effects of the Covid-19 which compelled government to institute some containment measures, the minister said the economy will still register higher growth compared to last year.