Malawi’s trade deficit is expected to shrink in 2017 after widening to an estimated 17.6 percent of the gross domestic product (GDP) in 2016, The Economist Intelligence Unit (EIU) has forecasted in their third quarter report for Malawi.
This, according to EIU, reflects a rebound in tobacco exports, as harvesting patterns normalise, and a sharp drop in food imports due to higher domestic production.
“Medium-term export growth will be driven by gradual expansion in exports of soybeans, tea, sugar and other cash crops, although growth will continue to be held back by infrastructure bottlenecks, a lack of finance for farmers and low technology agricultural techniques,” reads the report in part.
However, EIU notes that the services balance will remain in deficit owing to the high cost of transporting goods into and out of the landlocked country.
Overall, the current-account deficit is forecast to contract gradually, from an estimated 18.7 percent of GDP in 2016 to 16.7 percent in 2017, as agricultural exports recover and food imports decline.
The unit expects the current-account deficit to average 17.2 percent of GDP a year in 2018-21, mostly comprising a large trade deficit.
In a previous interview with Business News, Reserve Bank of Malawi (RBM) spokesperson Mbane Ngwira said the central bank will be pushing for policies aimed at revitalising growth and maintaining stability in the economy.
He was speaking in response to the surplus of K77.4 billion ($106.9 million) in balance of payments- a record of all economic transactions between residents of a country and the rest of the world at a particular period- that the country registered in the second quarter ( April to June) of 2017.
Malawi’s trade deficit-a negative balance of trade in which a country’s imports exceeds its exports- has been widening by the year despite various policy interventions to narrow the gap. n