The international Monetary Fund (IMF) has described 2018 economic performance as a jumble, adding 2019 could prove to be challenging with elections around the corner.
In a written response to a questionnaire on Thursday, IMF resident representative Jack Ree said the country’s track record suggests that this year will be challenging when election cycle is taken into consideration with one of these ushering in major waves of inflation.
“On the one hand, Malawi thwarted the much-feared inflation reversal despite some creeping-up of inflation towards the year end. And this reflects the fact that the authorities managed to stay the course of stability-focused macroeconomic policy. Kwacha had remained stable for three years in a row, which also helped rebuild confidence. However, growth slowed down—with climate and power challenges continuing to weigh on activities and sentiments.
“Since transition to multiparty system in 1994, there were five elections—and all but one of these ushered in major waves of inflation. Can we also break away from this traumatic inertia this year despite the elections? If so, Malawi will strongly position itself for remaking its economic history. Then and only then, investor will start believing a narrative that ‘this time it is different’,” he said.
Going forward, Ree said growth is expected to strengthen to about 4 percent in 2019, followed by a rise to 6 to 7 percent over the medium term.
Recently, Finance, Economic Planning and Development Minister Goodall Gondwe expressed hope that the economy would grow by at least seven percent in 2019, to be propelled by the stability seen in macroeconomic fundamentals in 2018.
Gondwe said such developments would lead to Malawi being able to finance its budget fully without the need for external support.
“We started well, what we have done so far is to stabilise the economy. It means that debt is not accumulating as it used to between 2014 and 2015 meaning that we can now start growth. I expect that we will catch up with the growth rate of seven or eight percent soon,” he Gondwe.
Ministry of Finance, Economic Planning and Development earlier revised downwards 2017 and 2018 growth projections, to an average of four and 4.5 percent, respectively, from the initial 6.4 percent and 6 percent respectively.
Economics Association of Malawi (Ecama) president Chikumbutso Kalilombe earlier observed that while this has become a norm, the main implications would be felt in the budget implementation as well as business activities.
“The main implication we see is that most times revenue projections are done based on such estimated growth figures which when not achieved cause budget imbalances leaving us in a constant state of deficit as a country. This is part of what has before cause an unstable macroeconomic environment.