The World Bank has urged the country’s policymakers to find lasting solutions to the economy’s continued episodes of “boom and bust”—alternate periods of high and low levels of economic growth.
World Bank country manager Laura Kullenberg expressed the sentiments at Sunbird Nkopola Lodge in Mangochi on Thursday at the start of a three-day Institute of Chartered Accountants in Malawi (Icam) Annual Lake Conference.
She said Malawi has suffered repeated episodes of growth followed by backsliding in recent years, adding that this cycle seems to repeat itself.
Kullenberg cited the most recent solid economic growth in 2014, which was driven by agriculture, information and communication technology (ICT) and trade.
She said at the beginning of 2015, prospects looked good only for the country’s economy to go into reverse gear due to a number of factors.
“Back-to-back weather shocks both floods and drought and continued macroeconomic instability have taken a toll on the economy. We now project a considerable slowing in the rate of gross domestic product (GDP) growth for 2015,” she said.
Kullenberg said Malawi is facing a large fiscal deficit, persistently high inflation rate, an unstable exchange rate and high lending rates, which continue to threaten growth and improved performance of the economy.
She said: “This current downturn in growth contrasts with the fact that there were some years in the last decade when the country achieved very high growth rates, in particular the years between 2006 and 2010. So, the question is then, what has continued to undermine economic transformation and what has driven periods of high performance?
“When we look at the period between 2006 and 2010, when the average annual GDP growth was as high as seven percent, we can attribute this to a combination of several factors, primarily a stable macroeconomic environment and, in particular, fiscal discipline, coupled with favourable weather conditions and good harvests, all of which were supported by large inflows of foreign aid. A ‘vicious cycle’ if you will.”
Kullenberg, however, said these cycles of success tend to be followed by the opposite phenomena of macroeconomic policy reversals, weather shocks, which deeply disrupt an economy concentrated on rain-fed agriculture and a few primary commodities, ineffective management of public finances and eruption of corruption scandals and an unpredictable and episodic foreign financing.
She urged policymakers to think of long-term vision “built on a strong and broad national consensus and shared commitment to priorities that can be sustained over time, beyond electoral cycles”.
On his part, Icam president Chiwemi Chihana said “time for fault-finding” is over and that Malawians need to find solutions to problems that have rocked the economy.
“We need to seize the opportunities that are there so that we can develop. We cannot continue to blame government. We must do something for our country,” he said.
The Icam conference brought together about 500 delegates and was held under the theme Transforming Economic Fortunes: Seizing Opportunities Within Malawi and the African Region.