Yet again, Malawi revised downwards economic growth projections. This has been the case in the past three years.
Ministry of Finance, Economic Planning and Development revised downwards the 2017 and 2018 growth projections to an average of four and 4.5 percent, respectively from the initial 6.4 percent and six percent, on account of poor agricultural output.
The poor output largely resulted from dry spells and fall armyworms, which according to the second round Agricultural Production Estimate Survey, maize production is estimated to have declined by 19.4 percent from 3.5 million metric tonnes recorded in 2016/2017 growing season to 2.8 million metric tonnes in the 2017/18 growing season.
Maize is Malawi’s staple grain that traditionally impacts the country’s economy given its skewed influence in determining inflation rates constitutes 45.2 percent in the consumer price index (CPI) that determines the average rise in the cost of living.
Economics Association of Malawi (Ecama) president Chikumbutso Kalilombe said while this has become a norm, the implications are felt in the budget implementation as well as business activities.
He said: “The main implication we see is that most times revenue projections are done based on such estimated growth figures which when not achieved, cause budget imbalances, leaving us in a constant state of deficit as a country.
“For businesses, strategies are formulated based on growth figures for specific sectors of the economy that contribute to the overall growth. When such is not real, businesses miss out with their strategic thrust.
“Unfortunately, business reaction can be that of taking a wait-and-see approach thus not investing into the economy which makes us stagnant.”
Earlier, Centre for Social Concern (CfSC) economic governance programme officer Lucky Mfungwe said the projected growth rate was too optimistic unless strategies were put in place to take care of climate change effects.
International Monetary Fund (IMF) resident representative Jack Ree observed that sporadic and lumpy revisions to growth forecast amplify the uncertainty that businesses need to deal with which he said is not helpful for building confidence.
“It is true that growth forecast lately saw more downward revisions than the other way round and this applies to both the authorities’ and the IMF’s figures. However, the recent softening of growth has been caused mainly by climate and utility shocks,” he said.
In its December 2018 Systematic Country Diagnostic: Breaking the Cycle of Low Growth and Slow Poverty Reduction, the World Bank observed that while weak institutions and limited policy buffers negatively affects growth, the adverse consequences of negative shocks tend to cumulate low growth which becomes entrenched.
The bank, however, said despite making strides economically, Malawi’s current growth is positive but weak compared to the rest of the sub-Saharan Africa region.
The bank observes that investment in Malawi has been low, mainly due to both the significant macroeconomic instability resulting from the government’s inability to manage shocks and several policy-induced shocks.
“This is compounded by structural constraints, including limited and erratic energy supply and a generally non-conducive business environment. In the past two decades, Malawi’s real GDP [gross domestic product] per capita has grown at an average of 1.5 percent, significantly lower than the average rate of 3.1 percent in non-resource-rich Sub-Saharan Africa [SSA] economies.”
Finance, Economic Planning and Development Minister Goodall Gondwe, however, said despite missing out on growth projections in recent years, Gondwe said Malawi’s growth rate remains the best in the southern Africa region.