Aid-flow rise to rescue economy—EIU

There is light at the end of a tunnel to the country’s ailing economy as the 2016 Economic Intelligence Unit (EIU) Malawi report has projected that growth in the economy will accelerate on account of aid inflows rise.

EIU also predicts macroeconomic stability to improve this year and investor sentiment to strengthen.

The report says buoyed by fuel availability and some improvements to transport networks, manufacturing will grow, although from a relatively small base.

But the report says the economy will remain dominated by agro-processing and, therefore, vulnerable to weather-related shocks.

“Agriculture will register modest growth, despite the declining potential for raising maize output through fertiliser usage and the slow progress on improving rural roads and irrigation infrastructure,” reads the report in part.

It further says investment will gradually expand cash crops beyond tobacco, but low global prices in 2016/17 for tea, sugar and cotton, which are Malawi’s main export crops, may delay investments until the later part of the forecast period.

Utilities sector will also perform well, driven by ongoing expansion and rehabilitation work to the country’s power network, the report says.

EIU hopes that if uranium production resumes—once world prices recover in 2019 at the earliest, together with rare earth minerals exploration—the two may support medium-term growth.

However, EIU made it clear that real GDP growth will remain subdued in 2016— at 3.2 percent—before picking up to a yearly average of five percent in 2017.

These projections should be good news to Finance, Economic Planning and Development Minister Goodall Gondwe who recently sounded upbeat on the future of the struggling economy by projecting that the economy could stabilise somewhere in May this year, “but depending on the weather pattern and climatic conditions”.

“We expect light at the end of the tunnel, which means stabilisation of the economy. If the weather behaves as well as we want, we should be stable somewhere in may,” said Gondwe.

In an earlier interview, Economics Association of Malawi (Ecama) president Henry Kachaje cast doubt that the economy would recover in 2016, and said assuming it would recover as projected by authorities, the poor will be left even more destitute than was the situation before recovery. n