Economists spell out GDP growth risks

Economists spell out GDP growth risks

Post was last updated: June 1, 2020

Dalitso Kabambe

The Economics Association of Malawi (Ecama) has said revenue short falls coupled with increased spending in the run up to the 2020 fresh elections pose a risk to the country’s economic growth outlook.

Just like many other economies across the world, Malawi is this year faced with the economic threat from the Covid-19 pandemic which has brought economies to a standstill.
In its budget submission to Finance Minister, Joseph Mwanamvekha, Ecama says the global economy is slowing down and Malawi is likely to be affected in one way or the other through reduced international trade, foreign direct investments, as well as infrastructure development, just to mention a few.Advertisement

“In addition, Malawi’s public resources stand a risk of much strain from the increased health spending towards efforts of fighting the Covid19 pandemic,” Ecama says.
Recently, the International Monetary Fund (IMF) in its Sub Saharan Regional Outlook for April predicted a 1 percent growth for the local economy.
With the number of Covid-19 cases skyrocketing in recent days, jumping to 279 fuelled by the returning residents from South Africa, analysts are playing a wait and see approach before coming up with their perceived impact of the pandemic on the local economy.Advertisement

Reserve Bank of Malawi (RBM) Governor, Dalitso Kabambe, recently said the country’s economic outlook remains uncertain in the wake of Covid-19.
“The key question for me is; how would the pandemic behave in Malawi. What pattern is it going to take? Is it going to take the same pattern as in the US where you are seeing a big increase on daily basis? Or is it going to be gradual and not go that far?

“When you talk to people in the Ministry of Health, the experts who are familiar with pandemics, they are also not certain as to what pattern it is going to be like. So it really depends,” Kabambe said.

Last week, portfolio and investment advisory management firm, Nico Asset Managers Limited, outlined five key threats that could stand in the way of Malawi’s economic growth and development during the remaining part of the year and beyond.

In its April 2020 Monthly Economic Report, the firm says the Covid-19 pandemic would heavily distract economic growth ambitions.
Other key risks mentioned in the report that could affect economic growth in the short to medium terms include high government debt levels, insufficient power supply, persistently weak export base and high population growth rates.
The firm said high government debt levels could create a future obligation for government to repay the debt plus interest.

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