Agriculture share of GDP to decline in 2012

Agriculture’s contribution to gross domestic product (GDP) is projected to decline this year to 27 percent from 28.3 percent last year, Reserve Bank of Malawi (RBM) figures show.

The projected drop in the sector’s share of GDP coincides with the revelation by the International Monetary Fund (IMF) that it expects the overall economy to grow by 1.9 percent this year from 4.3 percent last year.

Such a projected decline in the agriculture sector is despite billions of kwachas being spent on the Farm Input Subsidy Programme (Fisp) which has, in recent times, sparked debate on the programme’s sustainability.

Figures contained in a presentation titled Monetary and Exchange Rate Policies in Malawi, made by RBM Governor Charles Chuka at a recent joint IMF and Malawi Government conference early this month indicate that in 2010, agriculture contribution to GDP was at 27.8 percent before rising to 28.3 percent last year.

According to Chuka, the agriculture, forestry and fishing sectors contributed about 32.7 percent in 1980 before dwindling 10 years later in 1990 to 21.6 percent.

A Lilongwe-based agriculture economist on Tuesday warned that such a trend in agriculture contribution to national wealth should be a wake-up call to policy makers to speed up diversification efforts in other sectors such as manufacturing and mining.

“Agriculture in Malawi plays an overwhelmingly important role in the economy but these figures [show] that time is up for us to reduce the over-reliance on the sector, which mainly deals with primary commodities. More focus should now be put on other sectors such as transport, construction and manufacturing,” said the economist, who declined to be identified as he works for government.

Agriculture sector has over the years supported Malawi’s growth pillars, accounting for an average of 39 percent of GDP, 85 percent of the labour force and about 90 percent of the total foreign exchange, according to the 2004 Malawi Economic Growth Strategy (Megs).

Analysts contend that the GDP originating from agriculture is at least twice as effective in reducing poverty as GDP growth originating from outside agriculture.

Based on the RBM figures, wholesale and retail trade is poised to contribute about 20.6 percent to the economy this year and that manufacturing sector is projected to contribute about 9.2 percent.

Transport, financial and construction sectors are projected to contribute 3.9, 2.1 and 3.5 percent respectively.

Commenting on the revision of GDP figures this year, Finance Minister Dr. Ken Lipenga said last week that the initial figure was based on strong performance of tobacco and cotton sectors, but said that did not turn out the way government had anticipated.

“And because tobacco and agriculture in general are central to the economy, when you have slippages here and there, this has a tendency of pulling down growth,” said Lipenga.

But he sounded optimistic that next year, Malawi will experience a rebound in terms of economic growth to be driven by most of the sectors which, he said, have suffered this year.

IMF mission chief for Malawi Tsidi Tsikata said last week in Lilongwe that exogenous shocks have created a more challenging environment than expected for Malawi and cited drought conditions in some parts of the country as dampening the near term outlook for growth.

“Real GDP growth is estimated to have slowed from 4.3 percent in 2011 to 1.9 percent in 2012 mainly due to contraction in output from the agriculture and manufacturing sectors,’ he said.

According to a 2012 government annual economic report, in 2013, the agricultural sector is projected to grow by 4.7 percent on account of high tobacco prices offered this year which is said to encourage increased production in 2013.