Economic experts have described the 6.3 percent real gross domestic product (GDP) growth rate projection for 2014 as ambitious, forecasting that authorities may be forced to revise the figure downwards in view of prevailing economic situation gripping Malawi.
Both the Malawi Government and International Monetary Fund (IMF) are optimistic that the economy would demonstrate strong resilience this year, with the former eying 6.3 percent growth while the latter projecting a growth rate of between five and six percent buoyed by strong contributions from agriculture and retail trade sectors.
But in an interview yesterday, Nelson Mkandawire, executive director of Economics Association of Malawi (Ecama), a local economic think-tank, cast doubt on the projections, describing such “thinking as quite ambitious.”
Said Mkandawire: “The year started on a promising note because inflation was contained and was going down and when we started selling tobacco, things were promising despite donors not being there to support us. Import cover improved. But now, it is clear that such a thinking [of growing by 6.3 percent] is quite ambitious.”
He cited the rapidly depreciating kwacha as one key indicator that has already eroded some confidence in the economy, saying most of the sectors that traditionally underpin Malawi’s economic growth are currently shaky.
“Even achieving a five percent growth rate this year will be a milestone.”
Currently, the economy is gripped by high inflation and interest rates, heavy government domestic borrowing and a depreciating currency exacerbated by shortfalls in budget support.
A Blantyre-based investment advisory firm Nico Asset Managers Limited has also cast doubt on Malawi’s ability to attain high economic growth rate this year in the wake of both internal and external shocks.
The firm has insisted in its latest economic monthly review that risks to the 2014 economic growth are high inflation and lending rates, which it said, would lead to a slowdown in economic growth as they have the potential to reduce private sector activity.
“The shutdown of the Kayelekera Mine [in Karonga] may drag growth down as the exports contributed towards GDP growth,” said Nico Asset Managers.
Mining sector contribution to GDP this year would contract by 7.8 percent from around 7.6 percent last year, according to Malawi Government annual economic report for 2014.
On a positive note, however, the firm said growth in 2015 will be hinged on recovery in aid, the expansion of subsidies and improved investor sentiment as well as innovations in the mining sector.
Finance Minister Goodall Gondwe last week sounded confident that the economy would shift to normality as government is currently in constant engagement with development partners for a possible resumption of budget support and other technical support aimed at fixing the bruised economy.