Economists see current account deficit widening

Post was last updated: July 10, 2020

Some economic commentators have expressed fear that current account deficit would continue worsening in the short to medium terms unless the country adopts systematic and tactical ways of imports substitution.

Current account deficit is a measurement of a country’s trade where the value of the goods and services it imports exceeds the value of the products it exports.

Figures in the Financial and Economic Review recently issued by the Ministry of Finance show that current account deficit is expected to worsen slightly to $1.64 billion in 2020.

This represents a 2.6 percent increase from $1.6 billion deficit recorded in 2019.

The deficit is expected to further worsen to $1.7 billion in 2021, 2.7 percent higher than the 2020 projection

This comes as Malawi remains a predominantly consuming and importing nation.

Economic think-tank, the Economics Association of Malawi (Ecama) warns that if the country does not tame its appetite for imported goods and work towards improving private sector productivity, the gap would remain wide.

Commenting in an interview Thursday, Economics Association of Malawi (Ecama) president, Lauryn Nyasulu, said it is not surprising to see the position worsening because especially now that Covid-19 pandemic has hit most economies across the globe.

“With the pandemic, one of the areas that economies have been hit more is the trade side because volumes and values have been affected as the demand has been reduced in other countries and they are struggling to pick up from lockdowns and restrictions,” Nyasulu said.

In a separate interview, Chancellor College, economics professor, Ben Kalua attributed the widening deficit to high dependence on imports.

Economics professor at Chancellor College, Ben Kalua, said the country needs to rejuvenate its economic base if it is to reverse the trend.

“We need a long term economic transformation and restructuring programme to do away with primary production towards secondary production and exports so that we can have an economy which is more domestic and integrated,” Kalua said.

Malawi remains a predominantly consuming and importing nation, amid several attempts by the government and other stakeholders to put measure to ensure broadening of the country’s exports base.

Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.

He is however flexible as he also writes about current affairs and national issues.

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