Investment management and advisory firm, Alliance Capital, has said it expects consumer spending to accelerate in the coming months following measures announced in the national budget.
In its August 2019 Economic Report released on Friday, Alliance Capital says it expects the pickup in consumer spending, which was held back by relatively weak disposable income, to be triggered by a rise in wages.
Presenting the 2019/2020 National Budget in Parliament early this month, Finance Minister, Joseph Mwanamvekha, said government has planned a salary increment of between 10 and 15 percent for civil servants.
Mwanamvekha said civil servants in lower grades are expected to get relatively higher salary increment than those of high ranking grades.
The finance minister also announced an increase in the tax-free threshold on pay as you earn from K35,000 to K45,000.
Mwanamvekha also raise the minimum wage from K25,000 to K35,000 per month.
According to Alliance Capital, the pronouncements would help Malawians have some disposable income which could see them loosening their spending patterns.
A jump in consumer spending should be good news for the industry as it would mean increased production to meet the surge in demand.
The firm further says it expects economic growth to improve further on the back of improved macroeconomic fundamentals.
Alliance Capital adds that it expects the kwacha to remain stable heading into the lean season.
“First, demand pressures will continue to be contained by monetary policy operations. Second, tobacco inflows have augmented supply considerably.
“Upside risks to inflation continue to strengthen as food prices continue to rise on the market. Tighter monetary policy in order to contain inflation levels and supports interest rates to boost investments and economic growth in the economy should be expected,” reads the report in part.
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