Business slows down in first half

Post was last updated: July 23, 2018

BY TAONGA SABOLA:

The Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has said performance of the business sector slowed down in the first six months of 2018 as compared to the second half of 2017.

In its Second Quarter 2018 Economic Review, MCCCI says the slowdown was expected since the economy continues to face numerous macroeconomic challenges.

The chamber said, in particular, intermittent power supply and stiff competition from smuggled products are the biggest challenges faced by the business sector.

The average capacity utilisation rate, which is the percentage of actual output against potential output, declined from 68.8 percent recorded in the second half of 2017 to 59.6 percent.

It says private sector credit growth continues to shrink since June 2016, adding that the distribution of credit is largely concentrated in the wholesale and retail trade, agriculture and manufacturing which jointly account for 64 percent of the entire loan portfolio.

“Total loans of the banking industry stood at K480.3 billion as at 31st May 2018 representing a 10 percent growth year on year from K436.4 billion in May 2017. The industry’s nonperforming loans (NPLs) ratio declined to 12.7 percent as at end of May 2018 from 13.7 percent in April 2018.

“This decline in the NPL ratio was on account of write offs and recoveries and not necessarily on account of private sector performance,” reads part of the Economic Review.

MCCCI has also predicted a weaker Gross Domestic Product (GDP) growth for Malawi in 2018 and 2019.

Capital Hill has predicted a modest GDP growth of 4.1 percent in 2018 before the economy picks up by 6 percent in 2019.

But the chamber’s growth forecasts for Malawi have usually been erroneous going by the trend in the past decade, since the economy continues to rely on the agriculture sector which is often associated with climate related risks and unpredictable external demand for commodities.

“MCCCI estimates GDP growth for 2018 to slow down to 3.6 percent due to the dry spells and fall army worms encountered in 2017/18 season. Our forecast for 2019 continues to be cautious at 4.5 percent.

“We anticipate that intermittent power supply will likely continue in 2019 and this will compound the challenges and weaken performance of the industry sector,” MCCCI says.

In a recent interview, Electricity Supply Corporation of Malawi (Escom) Board Chairperson, Thom Mpinganjira, observed that there has been an improvement in the supply of power to industries, adding that factories in designated areas are only being load shed one day a week.

Mpinganjira said Escom is doing everything possible to ensure that the wheels of the economy keep running by supplying industries with power.

 

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