Malawi’s economy to slow down to 1.6%

Malawi’s economy is set to slow down further this year to 1.6 percent, far much lower than the initial forecast of 4.3 percent due to contraction in some major sectors, central bank governor Charles Chuka said on Thursday.

“On the basis of the estimates we knew in the first quarter of the calendar year, we had estimated and thought that GDP [gross domestic product] would grow at 4.3 percent… We now know after the second round of crop estimates in particular, that we are now looking at 1.6 percent growth this year,” he said.

Chuka said in an interview the review comes after production figures for tobacco fell more than half compared to last year. He said maize and cotton production also slightly dropped.

“That’s a huge change. In economics, we say that we have a supply shock, it’s coming at the wrong time, it should have come later and not this year,” he said.

Finance Minister Ken Lipenga said that preliminary assessments showed that the economic performance will slow down largely due to a significant contraction in agriculture, manufacturing, forestry and fishing, which have experienced a negative growth.

But he remained optimistic the economy would recover strongly in 2013 with agriculture, manufacturing and the retail sectors leading the way.

Malawi’s economy had been on a tailspin earlier this year due to a disastrous fight former president Bingu wa Mutharika picked with the country’s key donors, who withheld aid that traditionally account for about 40 percent of the national budget.

Mutharika died in April this year of a heart attack.

His successor, President Joyce Banda, has worked to restore aid flows and undo several policies that led to a foreign exchange shortage that drove up the costs in the kwacha currency for essentials such as petrol, food and pharmaceuticals.