Fears over growth, inflation prospects

 

The combined effects of dry spells and armyworms attack could thwart this fiscal year’s growth prospects and inflation rate target, experts have warned.

In an interview on Thursday, Lilongwe University of Agriculture and Natural Resources (Luanar) agricultural and applied economics senior lecturer Alex Phiri believes the current situation may undermine food output and overall economic growth.

He said: “Even without doing a detailed analysis or crop assessment in the fields, you can actually see that most crops are not doing well due to dry spells as well as the fall armyworms.

Dry spells will likely have an impact on maize output and the economy

“Should this continue, what we are seeing is that next year might be a worse off year in terms of food production than the previous years.”

Agriculture contributes about 30 percent to gross domestic product (GDP) and Phiri sees a reduction in output having direct impact on GDP growth prospects.

Ministry of Finance, Economic Planning and Development is forecasting a GDP growth rate of six percent in the 2017/18 fiscal year.

In the past few weeks, Malawi has received little or no rain in some parts of the country, a situation which has affected 12 percent of 1.7 million hectares (ha) of of maize, according to the Ministry of Agriculture, Irrigation and Water Development. On the other hand fall armyworms have affected 380 000 ha of maize.

In an interview, Centre for Social Concern (CfSC) economic governance programme officer Lucky Mfungwe said the projected growth rate was too optimistic unless strategies were put in place to take care of climate change effects.

He said: “The growth rate would hardly be reached in this context as agriculture alone is a major contributor to the country’s GDP.

“In addition, the dry spells may lead to speculations of price increase which will lead to hoarding of the maize which would be one of the factors to push maize prices up.”

Economics lecturer at Catholic University Gilbert Kachamba said with low agricultural output, there will be several implications with the most notable one being a rise in inflation rate.

Maize as part of food inflation, has a weight of 50.2 percent in the consumer price index (CPI), a statistical estimate constructed using prices of a sample representative items whose prices are collected periodically.

This means that any movement in the price of maize either way has a direct bearing on inflation rate, currently at 7.1 percent largely due to lower food prices.

But International Monetary Fund (IMF) country representative Jack Ree in an interview on Thursday said growth outcome in the end will depend on forces outside and within the fiscal and monetary authorities’ control.

“We cannot predict what nature would provide us this year. Unfortunately, droughts and floods are risks that we need to live with for now,” he said.

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