Economic stability to delay—Goodall
Finance, Economic Planning and Development Minister Goodall Gondwe has pared back earlier projections that the domestic economy would stabilise “soon” in early 2015.
Instead, Gondwe, speaking in Lilongwe on Friday said he expects the economy to “heal” in the third quarter [July to September] of 2015, because of the flood disaster.
The minister said prior to the disaster, the forecast was that although the rate of inflation has been crawling up during the past three months, it would steadily fall characteristically, as it does seasonally during the harvest season, beginning in April or May.
“But the after-effects of the disaster has shattered all these expectations that would have seen the achievement of normality during the third quarter of 2015,” he said.
The economy, according to Gondwe, is still passing through “turbulent times”, saying although there are encouraging signs on economic stabilisation, the economy is yet to reach a sustainable macroeconomic environment.
He said economic normality or stability would entail low inflation and interest rates, narrow exchange rate variability and predictable foreign exchange availability, among others.
Economists generally contend that in a stable economic environment, confidence is generated and economic activity becomes vibrant.
Currently, commercial banks’ base lending rates are ranging between 37 percent and 39.5 percent.
The minister said in rural areas, a stable economic environment enables people to experience a comfortable livelihood because food is plentiful and farmers are stimulated to boost their crop production to generate adequate income.
“Without the disaster the country has experienced, it is likely that our objective of reaching orderly macroeconomic conditions would have been attained quite soon.
“What is still true, however, is that without the disaster, the economy could have seen light at the end of the tunnel in April or May 2015.”
A monthly economic report for January by Nico Asset Managers Limited has said inflation is expected to begin decelerating in the first quarter [January to March] of 2015 as a result of the expected seasonal appreciation of the kwacha, low global oil prices and the recent reduction in local fuel prices.
The firm said some level of stability is expected on the foreign currency market in light of the recent policy changes that have been implemented and the buffer created by the foreign exchange reserves.
