The local economy continues to be vulnerable to myriad shocks with most indicators deteriorating in the past year, a recent report by investment advisory firm, Bridgepath Capital Limited shows.
In its Market Update for the week ended October 25, the firm says in the past year to September 2024, most key macroeconomic fundamentals remained volatile, exerting pressure on the economy.
For instance, figures in the report show that the local unit, the Kwacha, significantly depreciated during the period under review against major currencies such as the US dollar, moving from K1,126.50 to K1,750.31. This represents 55.4 percent depreciation.
The Kwacha also fell by 70 percent against the British pound to trade at K2,411.29 from K1,412.17. It fell by 65.9 percent against the Euro from K1,225.22 to K2,033.14.
The report further shows that headline inflation—the rate at which commodity prices change at a given time in an economy—increased by 6.5 percentage points to 34.3 percent in September 2024 from 27.8 percent in the same month last year.
Food inflation rose from 36.8 percent to 43.5 percent, while non-food inflation rose from 17.2 percent to 21.8 percent.
Gross Official Reserves also declined from $242.68 million in September 2024 to $146.3 million in February 2024.
However, total reserves, including private sector holdings, contracted from $652.14 million to $549.85
million by September 2024.
But the policy rate was held steady at 24 percent for a greater part of the period before increasing to 26 percent in early 2024.
In an interview, Economics Association of Malawi President Bertha Chikadza said the trend has an adverse impact on the economy.
She, however, painted a positive outlook.
“The government is also pursuing debt restructuring negotiations which, if successful, may help reduce debt to sustainable levels.
“However, there are significant risks to this outlook. Inflation is expected to remain elevated and this will continue to impact overall macroeconomic stability,” Chikadza said.
But another economist Velli Nyirongo said the outlook remains mixed.
He said without prompt corrective measures, the economy risks prolonged instability.
“The combination of a weaker currency and high inflation continues to erode real incomes, while elevated interest rates suppress business expansion, curtailing job creation and economic dynamism,” Nyirongo said.
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