- The Economist Intelligence Unit (EIU), the research and analysis division of The Economist Group, forecasts a widening current account deficit for Malawi, primarily due to a large merchandise trade deficit.
- The country is heavily dependent on imports of fuel and capital goods.
- Over the past decade, the current account deficit has averaged about 19% of gross domestic product.
The Economist Intelligence Unit (EIU), the research and analysis division of The Economist Group, forecasts a widening current account deficit for Malawi, primarily due to a large merchandise trade deficit. The country is heavily dependent on imports of fuel and capital goods. Over the past decade, the current account deficit has averaged about 19% of gross domestic product.
In its latest report, the EIU projects a significant current account deficit between 2021 and 2025 despite higher projected exports. It estimates that while export earnings are expected to rise in 2021 and 2025 due to a gradual recovery in external demand, import spending will also increase due to rising input costs. However, the trade deficit is expected to narrow gradually as export growth outpaces the rise in import expenditure from 2021 onward, with an acceleration in economic growth, particularly due to the commencement of work on investment projects, especially in the energy sector. The EIU forecasts higher export volumes for agricultural products, mainly tea, soybeans, and tobacco, supported by higher global prices.
In its recent economic analysis, Bridgepath Capital Limited noted that the rising current account deficit remains a concern, as export earnings rely on a narrow basket of agricultural products. It was highlighted that tobacco, which accounts for 56% of total exports, will continue to be affected by demand shocks.