The World Bank Group has urged Malawi and other developing countries to preserve their growth rates and also focus on raising such growth potential for their economies.
The Washington-based institution made the call in its newly-released Global Economic Prospects (GEP) report.
“Four years after the onset of the global financial crisis, the world economy remains fragile and growth in high-income countries is weak. Developing countries need to focus on raising the growth potential of their economies while strengthening buffers to deal with risks from the Euro Area and fiscal policy in the United States,” the bank has said.
The bank’s appeal comes barely few weeks after the International Monetary Fund (IMF) managing director Christine Lagarde projected that Malawi economy would grow by 5.5 percent, which is a 3.6 percentage points higher than last year’s 1.9 percent growth rate.
Last year, contractions in the agriculture and manufacturing forced Malawi government to revise economic growth rate downwards.
The Bretton-woods institution also plea coincides with a projection by the London-based Economist Intelligence Unit (EIU) which has pegged Malawi’s real growth rate in 2013 at 4.6 percent backed by recovery in aid, the expansion of agricultural subsidies, fiscal discipline, stabilising exchange rates and improved investor sentiment and also increased uranium production.
Quoting the World Bank Group President Jim Yong Kim, the report has observed that developing countries such as Malawi have remained remarkably resilient despite many global shocks.
Last year, developing countries recorded low economic growth rates partly because of the heightened Euro Area uncertainty in May and June of 2012.
“With governments in high income countries struggling to make fiscal policies more sustainable, developing countries should resist trying to anticipate every fluctuation in developed countries and, instead, ensure that their fiscal and monetary policies are robust and responsive to domestic conditions,” reads the report in part.
The bank says the weakness in high income countries is dampening developing country growth, but saying strong domestic demand and growing South-South economic linkages have underpinned developing country resilience.
Although fiscal sustainability in most developing countries is not an issue, the World Bank says government deficits and debt are much higher today than in 2007.
It says developing country gross domestic product (GDP) is estimated to have grown 5.1 percent in 2012 and is projected to expand by 5.5 percent in 2013, strengthening to 5.7 percent and 5.8 percent in 2014 and 2015, respectively.
During her visit in Malawi, three weeks ago, Lagarde bemoaned in insufficient diversification in Malawi where he said agriculture still accounts for 30 percent of GDP and tobacco still accounts for almost half of total export earnings.
Finance Minister Dr. Ken Lipenga told Business News in Lilongwe when he addressed a press conference alongside Lagarde that government will continue to work on the economic reform programme to stabilise the economy and promote growth and poverty reduction.
He said the reforms that Malawi has undertaken including the devaluation and floatation of the kwacha and the removal of subsidies on electricity were necessary to create the economic fundamentals to promote private sector investment and growth.
“I believe that we are on the right track and appeal to Malawians for patience as it will take time to accelerate economic growth which is required to underpin sustainable poverty reduction,” said the minister.