A latest Reserve Bank of Malawi (RBM) report showing that agricultural output will slump to 0.3 percent could be a sign that government may have overstated GDP growth rate for this year.
Malawi government projects a gross domestic product (GDP) growth rate of between six and seven percent on account of good performance in the agricultural sector which contributes about 30 percent to GDP.
But if the latest figures contained in RBM’s Financial and Economic Review for the fourth quarter (Q4) of 2017 are anything to go by, targeting a growth rate of six to seven percent this year could be overly ambitious.
The combined effects of dry spells and fall armyworms are likely to reduce agricultural output to 0.3 percent from a high of 6.5 percent last year, according to economic commentators.
Already, tobacco output is projected at 141 million kilogrammes (kg), way below the international trade requirement of 171 million kg.
In 2017, real GDP improved from the 2.7 percent growth recorded in 2016 to 5.1 percent, according to the report.
In 2016, the agricultural sector grew by 0.1 percent, the worst recorded performance dampened by the combined effects of dry spell and drought.
In an interview yesterday,
Economics Association of Malawi (Ecama) executive director MalekaThula said while the agricultural sector will play a huge part on growth, prospects, will remain robust and above average in comparison to the sub-Saharan Africa growth of around three percent.
“The revised growth projection for 2018 could be due to combined effects of fall armyworms and dry spells which are anticipated to reduce agricultural output.
“Also note that other sectoral growth projections have remained largely unchanged from previous projections. As such, the overall projection of 4.0 percent for 2018 is to a larger extent reflective of the anticipated slow growth in agricultural sector,” he said.
On maize, the country’s staple crop which has a huge bearing on the economy, the effects of dry spell and fall armyworms, are expected to cut output by about 40 percent or 210 740 tonnes, according to Ministry of Agriculture, Irrigation and Water Development figures.
This is bound to put pressure on inflation rate, which has adverse effects on the interest rates.
On the other hand, other sectors such as manufacturing, mining and utilities are poised to register growth during the year which could compensate for the subdued performance in agriculture sector.
Catholic University of Malawi economist Gilbert Kachamba described the 0.3 percent growth in the ‘biggest sector’ as insignificant to contribute to overall economic growth.
Treasury spokesperson Davis Sado earlier said government will review growth projections in view of the agricultural sector performance.