The SMEB for the urban areas, Rural North, and Rural Centre decreased since the last reporting period on account of a general reduction in food prices due to both weak consumer and agroprocessor demand.
The percent share of food in relation to overall expenditure currently ranges from 80 to 87 percent for the three rural regions and hovers at 55 percent for the urban SMEB.
Maize grain prices continue to remain low due in part to relatively light demand.
Background and Context
As the pandemic is still gathering pace in the country, so too is the continued contracting of the economy. Initial estimates from IFPRI point to a decrease in domestic revenues in 2020 by 3.5 to 4.5 percent due to COVID-19 . Shrinking revenues are likely to lead into increased government borrowing to maintain some level of support to key sectors including health, education, and agriculture, consequently increasing the public debt. Based on a recent budget statement, the Government of Malawi estimates a fiscal deficit of equivalent to 10 percent of GDP as per the 2019/2020 fiscal budget due to, among other factors, subdued revenue collection coupled with increased expenses due to COVID-19.
As the agriculture marketing season continues, weak demand for produce continues to be manifested through low prices. This is likely due to the depressed labour market resulting in relatively weak consumer demand as well as uncertainty vis-à-vis future profit prospects by the agro-industries manifested through a slowdown in economic activities as domestic and regional movements remain restricted. It remains to be known how long this pandemic will last, but it is certain that local producers are likely to be amongst the first to feel the squeeze in the coming months.