GDP growth revised downwards to 2.5%

Ministry of Economic Planning and Development has revised downwards the country’s gross domestic product (GDP) growth rate for 2021 by 1.3 percentage points to 2.5 percent as the Covid-19 pandemic continues to pile pressure on the economy.

In its recently published Malawi Covid-19 Socio-Economic Recovery Plan 2021-2023, Ministry of Economic Planning and Development and Public Sector Reforms acknowledges that although recent global vaccine approval and administration raised hopes of a turnaround in the pandemic this year, renewed waves and new variants of the virus remain a concern for Malawi’s national growth outlook.

Reads the plan in part: “Amid exceptional uncertainty, the economy grew at only 0.9 percent in 2020 and is projected to grow at 2.5 percent in 2021.

“This trend is reflective of the growth patterns that have prevailed in many countries around the world due to the Covid-19 pandemic, including sub-Saharan Africa.”

Earlier, Treasury, in its 2021/22 Budget Statement, projected the economy to grow by 3.8 percent in 2021, an aspiration economic commentators described as ambitious owing to the current macro-economic environment.

The falling growth forecast is an indication that the economy is shrinking.

On the contrary, higher growth rates of the economy result in increased employment rates, improved government finances, higher incomes and help to alleviate poverty.

An assessment by the International Labour Organisation disaggregated Malawi’s sectoral growth trends before and after Covid-19 and projected how the pandemic would reduce overall economic activity by diminishing various sectoral growth prospects for the country if the pandemic persisted to the first quarter of 2021.

Agriculture, the country’s single largest economic sector, was seen to slow down significantly from 5.2 percent and 5.3 percent to -3.3 percent and -0.1 percent in 2020 and 2021, respectively, with the incidence of Covid-19.

The education sector has also been greatly affected mainly due to the abrupt closure of school because of the pandemic.

Before the pandemic, Government projected the education sector to grow by 6.1 percent in 2020 and 6.5 percent in 2021. However, these estimates have been revised downwards to 1.9 percent in 2020 and 3.6 percent in 2021 due to the pandemic.

The growth of the health sector has also been projected to decline from 6.9 percent in 2020 to 2.5 percent in 2021, with the incidence of Covid-19, representing a downward revision of 4.4 percentage points.

At 3.8 percent, Treasury’s projection is more than the projections made by the International Monetary Fund (2.2 percent), World Bank (2.8 percent) and Economist Intelligence Unit (2.7 percent). Last month, Nico Asset Managers said growth projections by government maybe revised downwards after the impacts of the third wave of Covid-19 and the higher than anticipated depreciation of the kwacha are realised.