Weak global economy to lower Malawi exports

The global economy is expected to remain weak this year, according to Economist Intelligence Unit (EIU) Global Forecasting Unit, a development that may affect demand for Malawi’s exports.

As a consequence, Nico Asset Managers Limited, in its annual economic report, has warned that low export earnings will likely result in low foreign exchange availability; hence, further weakening of the kwacha which will likely push up inflation.

But there is good news, with the EIU saying that the closure of Congress’ January mini-deal on the ‘fiscal cliff’ removed an immediate threat to US growth prospects which could have had a dire impact on the overall global economy.

The downturn in the Eurozone is expected to ease as well as the European Central Bank’s (ECB) commitment in principle to unlimited sovereign debt purchases has calmed financial markets, and that the recent stimulus in China should also more visibly be boosting China’s economy.

In Malawi, growth is expected to pick up this year following a decline in growth in 2012, recording a gross domestic product (GDP) growth of 1.9 percent, according to the International Monetary Fund (IMF) projections.

“Although power supply continues to be intermittent and costly economic adjustments will damage productivity, the EIU forecasts growth of 4.6 percent whilst the IMF is forecasting growth of 5.5 percent and the Malawi Government is targeting annual GDP growth of 5.7 percent by December 2013,” says the EIU.

The London-based economic think-tank says Malawi’s growth in 2013 will be supported by the recovery in aid, the expansion of agricultural subsidies, fiscal discipline, stabilising exchange rates and improved investor sentiment as well as an increase in uranium production.

There are expectations that government will up its spending this year, and EIU said increased capital spending by the government will sustain growth in 2014, despite uncertainties over the tripartite elections affecting overall investment levels.