Malawi industry output to shrink by 1.7 percent

Malawi’s industry, which contributes about one fifth of the country’s economic activities, is expected to shrink by about 1.7 percent this year, putting jobs in the sector and tax revenue at risk.

The Economist Intelligence Unit (EIU) has indicated that although the economy will grow this year, driven mainly by agriculture and services sectors, other sectors are expected to shrink.

According to EIU, the industry—the processing of raw materials and manufacturing of goods in factories—will shrink by 1.7 percent, pushing exports of goods and services to fall by 1.8 percent.

However, the economy will be saved by the agriculture sector, which is projected to grow by six percent and the services sector which is projected to tick up by 4.8 percent, pushing the gross domestic product (GDP) to grow by 4.1 percent this year.

In contrast, government expects real GDP growth to pick up to 6.3 percent this year, largely driven by the agricultural sector.

However, Malawi Confederation of Chambers of Commerce and Industry (MCCCI), has said the EIU has underestimated the shrinkage because the situation is worse on the ground.

MCCCI president Newton Kambala said businesses are struggling due to the performance of the economy characterised by rising inflation and interest rate and the depreciation of the kwacha, among others.

He warned that due to the shrinkage in the industry, employees would lose their jobs while government will experience problems in collecting taxes and financing the current zero aid budget.

Government, however, expects all sectors of the economy to register positive growth rates except for the mining sector, which is estimated to contract following the suspension of uranium production at Kayerekera in Karonga.

According to Reserve Bank of Malawi (RBM) Financial and Economic Review released recently, the mining and quarrying sector is expected to contract by about 7.8 percent in 2014 compared to a growth rate of 7.6 percent registered in 2013.