The country’s gross domestic product (GDP) growth rate is forecast to rise to five percent in 2018 from this year’s projected 4.5 percent growth buoyed by the expected recovery in the agriculture sector and macroeconomic stability.
This is according to the latest economic review from the Reserve Bank of Malawi (RBM).
In 2016, the economy grew by a paltry 2.7 percent, dampened by slow growth in the agriculture sector due to drought.
According to the report, the agriculture sector is expected to expand by 6.8 percent this year from a contraction of 0.2 percent in 2016, attributed to an estimated increase in the production of crops such as maize and rice.
The central bank says expansions in construction, wholesale and retail and financial and insurance activities will also contribute to the pick-up in growth in 2018.
“In 2018, the economy is projected to grow by five percent on the assumption of continued favourable weather conditions and macroeconomic stability,” reads the report in part.
However, RBM says headline inflation slowed down to an average of 12.8 percent during the second quarter of 2017 from an average rate of 16.7 percent in the first quarter as compared to 21.7 percent registered during the same period last year.
Inflation is now at 10.2 percent as of July this year, according to the National Statistical Office (NSO), and the RBM has projected single digit inflation by December this year.
The growth in the agricultural sector is also helping the manufacturing sector, which is estimated to grow by 4.9 percent as compared to 1.4 percent last year as the two sectors are interlinked, according to the report. The industry is projected to grow by 6.0 percent in 2018.
Analysts, however, fear that the projected growth could be hampered by a deficit in electricity as Energy Generation Company (Egenco) is not producing adequate energy due to lower water levels in Shire River, the main source of hydro power generation.
But it says expected construction of Kamwamba coal-fired power plant, which is expected to begin in 2018, could boost growth in the energy sector.
In an interview on Sunday, economist Nelson Mkandawire, who is former executive director of Economics Association of Malawi (Ecama), said while the current macroeconomic status is positive, the benefits of the stability should also be trickling down to the people in the rural areas.
He said: “How would policymakers translate that stability to the lower level? Things are not all rosy in the rural areas, as I am talking.”
However, he said it takes time for economic growth to trickle down. n