Economists have advised on the need for the government to invest in other sectors other than agriculture, which has persistently been underperforming in recent years, denting the overall economic growth.
The Malawi Government Annual Economic Report 2016 show that the country has been experiencing a downward spiral in real gross domestic product (GDP) growth over the past few years.
For instance, from a growth rate of 5.7 percent in 2014, growth slowed to 3.1 percent in 2015 and government projected a growth of 5.1 percent in 2016, but the figure has been revised downward to a paltry 2.8 percent.
Although economists argue that GDP may be an imperfect representation of economic productivity, it is thus argued that a higher GDP growth is desired than otherwise.
The determinants of Malawi’s economic growth are centred on agriculture, which contributes close to 30 percent to GDP, but has recently been hit by El Nino-induced droughts, lowering agricultural output and leaving about 6.7 million Malawians in need of food aid, according to the recent Malawi Vulnerability Assessment Committee (Mvac) Report.
Last year, according to the annual report, the agriculture sector contracted by 1.6 percent on account of adverse weather conditions such as late onset of the rains, the January 2015 floods and uneven distribution of rainfall and dry spell.
However, the agricultural sector continues to be highly funded and in the current fiscal year, K198.5 billion has been allocated to the Ministry of Agriculture, Irrigation and Water Development, which is about 17 percent of the total budget.
Ben Kaluwa, economics professor at Chancellor College, a constituent college of the University of Malawi (Unima), has urged diversification in and outside of agriculture.
“For us to be on a stable basis, the economy has to diversify in and out of agriculture. There is low productivity in agriculture and our production is not as capital intensive as it should be,” he said.
Kaluwa said the country has to move out of the refinery sector to the secondary, tertiary and service sectors by being more involved in value addition and manufacturing.
He said the country has under-invested in almost every sectors and there is need to invest more finance capital in the formal service sectors.
Sharing the view, Catholic University of Malawi head of economics department Gilbert Kachamba said rain-fed agriculture is not helping as much; hence, the need to commercialise agriculture while creating an enabling environment for growth of the manufacturing and service sectors.
“There is a declining value of agricultural commodities, all these make the future looks bleak, but all is not lost,” adds Kachamba.
The two economists argue that for the country to grow economically, population growth must be lower than the GDP growth. n