Reserve Bank of Malawi (RBM) has indicated that domestic economic growth prospects remain uncertain in 2021 owing to the rising Covid-19 cases which have necessitated restrictions and new measures to contain the spread.
Governor Wilson Banda in this year’s first Monetary Policy Statement issued on Wednesday noted that since the beginning of 2021, the Covid-19 infections and fatalities have increased sharply and this has compelled the government to re-impose strict containment measures.
He said: “Consequently, domestic economic activity, which started to rebound in the second half of 2020, has moderated.
“Economic growth for 2021 will, therefore, depend on how fast the second wave of the pandemic dissipates. In general, domestic economic growth could remain subdued in 2021.”
In its 2020 Annual Economic Report issued last week, Nico Asset Managers also observed Malawi’s economic outlook faces considerable downside risks including the impact of the Covid-19 pandemic, weather shocks and fiscal slippages.
Taking into consideration these factors and the long-standing issue of intermittent power supply which in turn affects Malawi’s manufacturing industry; the firm indicated that gross domestic product (GDP) is most likely to be lower than anticipated.
But on the global front, the International Monetary Fund (IMF), in its January 2021 World Economic Outlook (WEO) update indicated that the world’s economy will expand by 5.5 percent in 2021 from an estimated contraction of 3.5 percent in 2020.
The recovery is premised on limited impact of the Covid-19 pandemic as most countries get access to vaccination as well as continued policy support in some large economies.
Last year despite a robust performance in the first half of 2020 owing to a strong harvest and substantial government spending, the country’s economic activity in the second half of 2020 suffered from a further deterioration of the global economic outlook, resulting in substantially lower exports, a worsening economic impact of the Covid-19 pandemic and a further revised downwards its 2020 economic growth projections from 1.9 percent to 1.2 percent.
Meanwhile, various local and international institutions have revised their projections for the Malawian economy and based on the revised projections the economy will grow by an average of 3.3 percent in 2021 and percent in 5.3 percent 2022.
The World Bank, for instance, has put Malawi’s economic growth at 3.3 percent this year, below the pre-Covid-19 pandemic projections as risks including the resurgence of the virus remain prevalent.
The bank’s projection, contained in its January 2021 Global Economic Prospects is two percentage points higher than its projection of 1.3 in 2020.
A low growth rate percent is worrying to the economy as it could further increase poverty levels, especially in the informal service sectors in urban areas, let alone in rural areas where the majority of Malawians live.
Poverty levels were projected to worsen in the just ended year to 56.3 percent from 50. 5 percent as the measures which were effected to reduce the Covid-19 spread had reduced household incomes by an average of 11.4 percent, according to the International Food Policy Research Institute.