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MALAWI COURT BATTLE’S TAKING ECONOMY BACKWARDS, PROPHESOR WARNS

By Cy’rus Bengo in Namibia

After three chaotic years, investors have several reasons to be cheerful about the world economy. In America inflation is tumbling, raising hopes of a “soft landing”, in which price growth comes under control without a recession.

Malawi’s GDP was ranked 144 nominal in 2019

Some policymakers hope that companies, whose profits surged in 2021, can absorb rapid wage growth without prices having to rise further. Yet by last autumn, higher profit margins accounted for only an eighth of pandemic-era inflation. Given that Wall Street is expecting disappointing earnings for the fourth quarter of 2022, this suggests that firms will raise prices in line with their labour costs.

Markets expect the Fed to start cutting interest rates within a year as growth slows. But if the Fed is serious about reducing inflation to 2% and keeping it there, it will need to keep rates high until wage growth cools—even if that brings about a recession. Fortune has smiled on Europe, where a mostly warm winter has caused energy prices to plummet. China’s economy freed from XivJinping’s destructive “zero covid” policy , is poised to rebound.

Alas in Malawi , policy makers are in the land of Nods instead to draw on exerting efforts to get our economy on track , they are preoccupied with court cases. According to Professor Betchani Tchereni a renowned economist.

Professor Betchani Tchereni, renowned economist

“Your legal battles has become boring , these are only taking effort backwards, some work hard to win donor support and building international relationship” he fumed.

The end of zero-covid in China has lowered the chance that supply chains will gum up. However, its rebound is not an unalloyed good for the rest of the world, which has an inflation problem, not a shortage of spending. China’s extra imports will add more fuel to overheated economies. Europe’s gas storage is so full in part because China’s demand for liquefied natural gas in 2022 was 20% below its usual level. Demand is now likely to bounce back, which could cause prices to surge once again next winter. Only when the twin foes of overheated labour markets and the energy crisis have been vanquished will the world economy be out of the woods.

Headline inflation picked up to 24.6% year-on-year in July 2022. Food inflation reached 32.5%, largely due to an increase in maize prices. Non-food inflation increased to 17.5%, with particularly large increases in the costs of transport and utilities driven by international price increases and the adjustment of the exchange rate. The Reserve Bank of Malawi devalued the Malawi kwacha, MWK, against the US dollar by 25% in May 2022. However, splits between official transfer rates and cash rates have since reappeared since. Official reserves continue to be very low, declining further from their gross position of 1.6 months of import cover at the start of the year. An acute lack of foreign currency is impeding businesses and is increasingly reflected in the shortage of imported goods, including essential medicines and petroleum products.

Climate shocks, low agricultural productivity, and slow structural transformation mean that poverty levels remain high in Malawi. The national poverty rate has only marginally declined from 51.5% in 2015/16 to 50.7% in 2019/20. The internationally comparable poverty headcount ratio— $1.90 a day (2011 PPP)—stood at 73.5%, one of the highest globally. The Malawi Vulnerability Assessment Committee (MVAC) report for the 2022/23 consumption season, released in August, has shown that about 2.3 million people face food insecurity and require assistance. The analysis also anticipates a total of 3.8 million (about 20% country’s population) people will be facing critical food security outcomes in the next 5-6 months.

Malawi continues to rely on subsistence, rainfed agriculture, which limits its growth potential, increases its susceptibility to weather shocks, and creates food insecurity. Trade policies and an unpredictable business environment continue to impede investment and commercialization, as well as erratic electricity supply.

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