UK-based Economist Intelligence Unit (EIU) says it expects growth in the local economy to slow down in 2018.
EIU last year projected that the local economy would swell by 4.4 percent.
But according to Nico Asset Managers December Economic Brief released on Monday EIU projects the economy will slow down by 0.3 percentage points in 2018.
“This downward revision emanates from the likely reduction in maize output this season, expected slow growth in tobacco production, and the industrial sector, which is unlikely to emerge as the key driver of growth due to stiff competition on the international market,” Nico Asset Managers said.
The World Bank has predicted the local economy to grow by 4.5 percent in 2018 from 4.4 percent in 2017 while the International Monetary Fund has predicted a five percent Gross Domestic Product growth in 2018 from 4.5 percent in 2017.
“However, this recovery will be dependent on a sufficient agricultural output and power supply, a reduction in government borrowing, if the national budget is sustained and prudent macroeconomic management to avoid further instability,” Nico said.
Capital Hill has indicated that the economy is recovering and was expected to grow by at least 6.10 percent in 2017.
This is due to the fairly stable currency depreciation, favourable weather patterns, which may spur agricultural production and a downward trend in inflation.
In his New Year’s address, President Peter Mutharika said the economy would continue growing in 2018.
“In 2018, I will ensure that our economy grows more to benefit more people because that is what inclusive development is about,” Mutharika said.
Nico Asset Managers further said it expects the kwacha to remain stable in the short-term due to continued inflow of foreign exchange reserves, which are adequate to cushion the foreign exchange market and guard against the kwacha volatility.
It further said, in the short term, it expects food inflationary pressures would remain subdued.
“Non-food inflation may increase due to the possible rise in global oil prices if the global cut in oil production succeeds, and if the rising tensions in the Middle East persist.
“Other factors include the demand for wage increases, housing cost increases, and high costs of production arising from power outages which has forced firms to opt for more expensive power generation alternatives,” Nico said.
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