The International Monetary Fund (IMF) has cut further Malawi’s economic projection for this year to 0.6 percent due to poor macroeconomic outlook occasioned by the Covid-19 pandemic.
This is the second time this year for the global lender to slash the country’s real gross domestic (GDP) growth forecast for 2020 from an earlier projected one percent growth made in May. It is also a major downward revision compared to pre-Covid-19 pandemic projection of 5.1 percent.
The IMF’s projection is far less than the optimistic projected 1.9 percent Minister of Finance Felix Mlusu announced in the 2020/21 National Budget on September 11 at Parliament in Lilongwe.
But the 0.6 percent forecast is above the projected negative 3.5 percent real GDP, which the World Bank earlier projected in its Malawi Economic Monitor (MEM) released in July this year.
In its Country Report for Malawi, the IMF said the local economy is expected to start experiencing a gradual recovery during 2022-2025 period.
Reads the IMF report in part: “Growth is expected to fall to 0.6 percent in 2020 and to 2.2 percent in 2021 [0.4 and 0.3 percentage points below IMF earlier projections].
“Following a robust performance in 2020 first half owing to a strong harvest and substantial government spending, economic activity in 2020 second half is suffering from a further deterioration of the global outlook, resulting in substantially lower exports, a worsening economic impact of the pandemic and a longer persistence of the shock.”
Such a lower-than expected growth rate of 0.6 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.
In a written response on Thursday, IMF resident representative Farayi Gwenhamo said prior to the pandemic’s acceleration in June, domestic economic activity benefited from a favourable maize harvest.
She said: “Growth has, however, suffered in the second half of the year due to spillovers from the global and regional economic slowdown on account of the Covid-19 pandemic.
“The current projection of 0.6 percent economic growth in 2020 reflects these developments. However, the full impact of covid-19 on 2020 growth will become clearer when more information on business activity becomes available.”
Democratic Progressive Party spokesperson on finance matters in Parliament Joseph Mwanamvekha, who is also former minister of Finance, described as “overly optimistic” the assumption that the country’s economy will grow by 1.9 percent this year and 4.5 percent in 2021.
“It is, therefore, inconceivable to believe that Malawi is an exception more so considering the fact that since the first quarter of this year, most businesses in this country have slowed down their operations with the worst affected being the tourism sector,” he said.