By Taonga Sabola, LILONGWE Malawi
The African Development Bank (AfDB) has said
it expects the local economy to bounce back strongly next years after
weathering the storm of Covid-19 this year.Blantyre City
In
its 2020 Africa Economic Outlook released on Tuesday, the bank has projected
that in the baseline scenario, the local economy could swell by 1.3 percent
this year and 0.6 percent in the worst case scenario.
AfDB
says growth would recover to 2.6 percent and 3.3 percent, respectively in 2021
buoyed by agriculture, tourism, export receipts and a rebound in foreign direct
investment.
“In the
short term, the subdued foreign exchange inflows could depreciate the local
currency,” the outlook says.
It
further notes that the $213.2 million spending to contain the effects of
Covid-19 is likely to widen the fiscal deficit to 6.1 percent of the GDP in the
baseline scenario which could further deteriorate to 6.6 percent in the worst
case scenario, should the pandemic persist up to the end of 2020.
“And
the public debt to GDP ratio could widen beyond the current 62 percent of the
GDP and inflation could rise to 12.2 percent in 2020 driven by import supply
disruption.
“The
current account deficit would widen to 17.8 percent of GDP in 2020 from 16.7
percent in 2019, driven by lower than expected foreign exchange earnings from
tobacco, Malawi’s main exports,” the report says.
According
to the report, real GDP in Africa is projected to contract by 1.7 percent in
2020, dropping by 5.6 percentage points from the January 2020 pre-Covid–19
projection, if the virus has a substantial impact but of short duration.
“If
it continues beyond the first half of 2020, there would be a deeper GDP
contraction in 2020 of 3.4 percent, down by 7.3 percentage points from the
growth projected before the outbreak of Covid–19,” the report says.
Last
week, the International Monetary
Fund (IMF) maintained a one percent growth projection for
Malawi in 2020 before the economy rebounds to 2.5 percent in 2021.
The Treasury recently said the government was working on two scenarios first which assumes that Covid-19 would ease by September 2020 while the other, a worst case scenario, assumes that Covid-19 would ease by December 2020. - Africa
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