Year Ender: Shrinking trade and exports in year 2015

Post was last updated: January 5, 2016

The year 2015 started with floods and droughts in some areas , damaging infrastructure and crops and it appears that the catastrophe still haunts the economy as low agricultural production is set to shrink trade volume.

The World Bank projects that Malawi will register declines in both exports and imports in 2015 as the economic growth have been revised downwards to 3.1 percent.

In its second Economic Monitor Report released recently, the World Bank says exports are projected to decline from US$1.58 billion from US$1.75 billion last year while imports are expected to drop from US$2.39 billion to US$2.10 billion.

“The deficit is projected to shrink as imports fall at a more rapid pace than exports. In 2015, the value of this current account deficit is expected to decline to the equivalent 4.1 percent of the GDP, compared to 5 percent in 2014,” says the report.

The bank has explained that the reduction in exports is expected to be driven by a 100 percent reduction in uranium, about 50 percent reduction on cotton exports and other significant drops in exports of rice, coffee and tobacco.

However, the effects of export declines are suppressed by considerable declines in some imports of coal, paraffin, petrol, diesel and fertiliser, according to the bank.

Malawi’s trade woes are fueled by both internal and external shocks as according to the bank a mixture of low demand of Malawian products on the international market and the affected agricultural performance in the year.

“Demand for Malawi’s key exports has deteriorated somewhat due to slow growth in developed markets and an economic downturn in sub- Saharan Africa. Recession in South Africa, Malawi’s largest trading partner, has also dampened the prospects for Malawi’s exports,” reads the World Bank report, in part.

The National Export Strategy (NES) is one tool that government introduced to help diversify export base but three years down the line the status quo remains as there is less impact on the ground.

Ministry of Industry and Trade admitted that the NES is not impacting on the ground as it ought to do hence some measures already underway to improve its effectiveness.

By 2017, the NES shows exports target of about US$2.5 billion with growth driven by tobacco at close to US$700 million, sugar and sugarcane products at US$453 million, mining at US$246 million, and oil seed products at US$227 million.

While trends already show annual declines of exports value of tobacco, tea, sugar and mining, the oil seed and sugarcane products have not had their industries yet hence the 2017 targets might be missed.

Deputy Director of Industry, Silas Sindi, said government, realising that the NES is indeed somewhat off track, is implementing a number of initiatives that will eventually help the NES have effects.

He cited low productivity of farmers and quality issues as constraints to increased exports.

He further said Ministry of Agriculture has been roped in to be part of the NES implementation from the production side.

“All along the Ministry of Agriculture has been focusing on food security but through this involvement they will help us on production for processing and exports,” said Sindi.

On quality issues he said the implementation of Malawi Bureau of Standard (MBS’s) Standard, Quality Assurance and Metrology (SQUAM) project will increase capacity of the country to credibly certify products.

The current situation requires recertification of local products in South Africa, a costly process that make local products lose some ground when competing with others on prices.

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