Malawi’s Taxonomy of Growth, which measures recent macroeconomic performance in Sub-Saharan Africa, is said to be slipping, the World Bank has said.
In its October 2020 version of the Africa’s Purse, the Bretton Woods institution said in Sub-Saharan Africa, the economic impact of the coronavirus pandemic has been severe even though it has not been as widespread as initially anticipated.
It said external headwind driven by lower external demand, disruption of global value chains, and declining flows of foreign financing and the containment measures to combat the spread of the pandemic have taken a toll on Sub-Saharan African countries, including Malawi.
The report ‘An Analysis of Issues Shaping Africa’s Economic Future: Charting the Road to Recovery,’ observes that uncertainty still continues as the health crisis is not over yet, warning, Malawi and the region at large must not let its guard down.
It said the number of countries in the bottom tercile of growth performers has increased to 30, up from 21 in October 2019.
This group of countries includes Angola, Botswana, Burundi, Lesotho, Liberia, Madagascar, Malawi, Mali, Zambia, and Zimbabwe. The countries account for 60 percent of the region’s population (646 million people in 2019) and produces 70 percent of the region’s total gross domestic product (GDP).
“This section finds that Sub- Saharan Africa appears to have suffered a lesser blow from the pandemic than other developing regions. Still, there is great variability in the 2020 growth decline across Sub- Saharan African countries.
“Three countries have a decline in economic growth smaller than three percentage points [are] Malawi, Mozambique, and Burundi,” reads part of the report.
According to the report, top tercile of growth performers in the region, which includes the improved and established countries, comprises only five countries-Côte d’Ivoire, Ethiopia, Ghana, Guinea, and Rwanda as opposed to 10 countries in October 2019.
To recover from the effects of the pandemic, the World Bank has urged governments to implement measures to create fiscal space, and designing policies to chart the course for rapid growth and job creation on the road to recovery.
The Bank has also urged countries like Malawi to utilise the African Continental Free Trade Area (AfCFTA), which, if once fully implemented, will become the largest free trade area in the world in terms of membership.
According to the report, the AfCFTA will cover a market of 1.3 billion people and US$3.4 trillion in economic activity and by 2050, Sub-Saharan Africa will account for one-third of the global labor force.
It said under the AfCFTA scenario, total manufacturing exports from Africa will register the largest increase (62 percent from the baseline for 2035), while manufacturing exports within the region and to the rest of the world will increase by 110 and 46 percent, respectively.
A 2019 Study by the then Ministry of Trade, Industry and Tourism showed that Malawi could lose about $11 million (about K8.2 billion) a year due to expected liberalisation of tarrifs under the AfCFTA.
It said there are greater trade and market opportunities that will be borne out of the AfCFTA, but warned there are challenges Malawi will have to take into account because tarrifs on imports coming from Africa will be removed.
While presenting the 2020/21 budget, Finance Minister Felix Mlusu said government will face further challenges in its revenue mobilisation efforts due to the Covid-19 pandemic and the political impasse which will make it much more difficult to finance the budget during the 2020/2021 fiscal year.