Economists forecast doom for consumers
Economics Association of Malawi (Ecama) says slower economic growth coupled with high inflation will make it more difficult for consumers to earn a decent living.
Ecama’s sentiments follow recent projections by the Economist Intelligence Unit (EIU) that real gross domestic product (GDP) growth will be depressed to 0.7 percent in 2023 compared to the government projection of 1.9 percent for 2023.
EIU, the research and analysis division of Economist Group based in London, United Kingdom, also projected 2023 inflation to average 30.6 percent, way above the Reserve Bank of Malawi’s (RBM) projection of 24.5 percent in 2023, with the policy rate projected to increase by 400 basis points to 26 percent.
In a written response on Friday, Ecama executive director Frank Chikuta said the projections entail an erosion of purchasing power for consumers.
He said: “Monetary policy is indeed expected to remain tight in the foreseeable future as inflationary pressures are projected to remain elevated.
“However, it is difficult to predict the magnitude with which the MPC is going to raise the policy rate, if at all it is going to raise it, since a number of factors come into play when the authorities are deciding the policy stance.”
In April, RBM raised the policy rate from 18 percent to 22 percent, citing rising inflation rate currently at 29.2 percent.
National Working Group on Trade Policy chairperson Frederick Changaya said tightening further the monetary policy will be forecasting inflation acceleration.
He said: “I would propose pathways that do the opposite such as loosening monetary stance to engineer growth in real output, real wages, opening up of sectors that have more multiplier effects and increasing returns.
“For the consumer, it spells out doom. Policy stance determines interest rates and exchange rate direction. Tightening means acceleration of the fundamentals.”
Changaya, who is Applecore Grain and Milling Limited managing director, said the quality of life is going down and that brings more negative social dividends.
“Decreasing health, productivity, education and many other indices,” he said.
Consumers Association of Malawi executive director John Kapito said failure to come up with a comprehensive economic policy on the part of the government has created many challenges.
“We have had some economic challenges, but that cannot be the reason why our economy has completely collapsed with no signs of recovering,” he said.
RBM is expected to hold its third Monetary Policy Committee meeting in 2023 between July 26 and 27 this year.
