The Reserve Bank of Malawi (RBM) has maintained the country’s real gross domestic product (GDP) growth rate forecast for the year 2015 at 5.4 percent.
The decision to maintain the growth projection follows the country’s Monetary Policy Committee (MPC) meeting of RBM on Tuesday, which resolved to maintain the growth rate.
“On the domestic front, real GDP growth estimate remains unchanged at 5.4 percent in 2015,” said the MPC minutes signed by RBM Governor Charles Chuka.
Earlier in April this year, RBM revised downwards real GDP growth rate forecast by 400 basis points from 5.8 percent to 5.4 percent.
The downward revision was on account of the ravaging impact of the floods and delays in rains that characterised the country, especially in January this year.
The central bank also said the revision was necessitated by a contraction in agriculture due to late on-set of rains and early cessation of the rains.
World Bank estimates that the recent floods would cost the economy 0.56 percent in 2015 or roughly K12 billion ($24 million) based on the nominal GDP figure estimated at K2.2 trillion.
An estimated 89 000 hectares of cropland, according to official government statistics, was destroyed by the floods, representing around 2.4 percent of total agricultural land in Malawi.
Head of economics at Catholic University, Gilbert Kachamba on Tuesday said it was evident after the floods that the county’s economic growth trajectory this year would be negatively affected.
Said Kachamba: “Considering the significant contribution that agriculture rakes to the domestic economy, any external or internal shock to the sector is bound to affect the overall growth of the economy.”
A recent economic report by the Blantyre-based Nico Asset Managers Limited indicated that economic growth for 2015 is projected between 3.8 percent and six percent.
It said growth in 2015 will be hinged on the recovery in aid, expansion of agricultural subsidies, improved investor sentiment, innovations in the mining sector and a possible increase in foreign direct investment resulting from the investment forum.
“Risks to the forecast include slower than expected disinflationary process, high interest rates, larger fiscal deficits and impact of adverse weather conditions,” said the firm.