Malawi expects to double her per capita income—average income earned per person in a given area—in the next five years from the current level of $380 (K277 billion) with the scaling up of the investment, a government report has shown.
According to the final draft of the Malawi Growth and Development Strategy (MGDS) III, this level of gross domestic product (GDP) per capita is achievable if the country is committed to slow population growth which is currently very high.
According to the strategy, fiscal overruns are premised on the fact that the macroeconomic framework recommends an up-scaling of investment by an additional $1.2 billion (about K876 billion) during the implementation period.
This capital injection will result in a GDP growth rate of about 6.9 percent during the first year and an average of 6.2 percent in the subsequent years.
This is expected to create an estimated 11 percent increase in employment and tax revenue, according to the report.
It is proposed that the country should invest 33 percent in the first year, 24 percent in the second year, 16 percent in the third year, 16 percent in the fourth year and finally 11 percent in the fifth year.
“Increase in investment is expected to spur economic growth by creating jobs and reducing inequality. Investment will be directed towards the flagship projects that have multiplier effects on other areas.
“Considering the limited funds available, allocation of resources will be prioritised to areas that have immediate and high rates of return, namely the areas of industrialisation, agriculture and energy,” reads the report in part.
However, in its May 2017 Malawi Economic Monitor, World Bank projections show that climate change will have a negative impact on the country’s per capita GDP.
“At the high end of the uncertainty in damage estimates, the decrease in GDP per capita by 2050 ranges from 21 percent in the low warming scenario to up to 30 percent in the high warming scenario. If such decreases were to materialise, they would have serious implications on poverty reduction and social and human development in Malawi,” said World Bank senior country economist Richard Record in the report.
The third Malawi Growth and Development Strategy (MGDS III) will be implemented from 2017 to 2022. It is the fourth medium-term national development strategy aligned to the country’s long-term development aspirations which are articulated in Vision 2020.
The previous development strategies that were developed to implement Vision 2020 were the Malawi Poverty Reduction Strategy Paper (MPRSP), the Malawi Growth and Development Strategy (MGDS) I and II.