A number of economic signs indicate optimism for the economy to turn around this year driven largely by a rebound in agriculture, wholesale and telecommunications sectors.
The International Monetary Fund (IMF), for instance, predicts that real Gross Domestic Product (GDP) growth is expected to pick up to between four and five percent in 2017 after two consecutive years of drought which saw GDP falling below three percent in 2016.
In a statement issued after completion of its review mission in the country, IMF’s Missions Chief to Malawi, Oral Williams, said economic fundamentals are pointing to better outcomes.
“The consumption-led recovery is expected to be driven mainly by a rebound in the agriculture, wholesale and retail, and telecommunications sectors,” Williams said.
Malawi’s economy was hit hard by the negative impacts of drought.
Some economic commentators are also optimistic of the economy taking a positive trajectory as hopes are running high over this year’s harvest.
Headline inflation has since fallen to 16.1 percent in February 2017—its lowest level in recent years.
Both food and non-food inflation rates have contributed to the downward trend, “reflecting prudent monetary and fiscal policies” and the stabilisation of food prices on account of humanitarian response.
The inflation drop also influenced the Monetory Policy Committee (MPC) of the Reserve Bank of Malawi (RBM) to cut the policy rate from 24 percent to 22 percent.
This is the second time in five months that monetory authorities have slashed the policy rate following a 300 basis point cut, from 27 to 24 percent in November 2016.
Economist at the Catholic University, Gilbert Kachamba, is optimistic that attaining five percent growth this year is possible.
He said this is buoyed by a recent growth in physical capital stock and an increase in investment.
“This is very possible looking at the improvements in some of the macroeconomic indicators like inflation, lowering of policy rate and also bumper yields. This is likely to cause real GDP to go up,” he said.
In January this year, RBM projected that the economy would rebound in 2017 forecasting domestic economic activity to grow by 5.6 percent.
In 2016, RBM projected the economy to grow by 5.1 percent but later revised growth to 2.9 percent.
Leave a Reply