Economy to deceralate to 0.7%, says US firm

A US-based data and research provider Fitch Solutions says Malawi’s economy will decelerate to 0.7 percent this year following the negative impacts of Tropical Cyclone Freddy.

The firm had earlier projected the economy to register a 3.7 percent growth during the year, from an estimated one percent registered in 2022 and below the sub-Saharan Africa average of 3.5 percent.

In an update on the economic impact of Tropical Cyclone Freddy in Malawi and Mozambique, Fitch Solutions said it expects that Tropical Cyclone Freddy will have a larger economic impact in Malawi than in Mozambique due to Malawi’s heavier dependence on the agriculture sector.

Reads the update in part: “While the agriculture sector employs over 65 percent of the working population in both countries, Malawi is less economically diverse than Mozambique.

“Indeed, at least, 85 percent of Malawi’s goods exports are agricultural products, which makes it more vulnerable to climate shocks than Mozambique, where agricultural products account for only 15 percent of its total goods exports.”

To this end, the firm said the latest cyclone will exacerbate existing constraints on growth, including the country’s deteriorating fiscal and external position, high inflation since the second half of 2022 and other recent weather events such as Cyclone Ana in 2022.

In 2022, Treasury estimated gross domestic product (GDP) to grow at 1.2 percent; a recession from the 4.6 percent registered in 2021.

On Wednesday, the National Planning Commission (NPC) said the Malawi 2063 first 10-Year Implementation Plan (MIP-1) targets are still attainable despite the negative impact of Tropical Cyclone Freddy on the economy.

NPC director general Thomas Chataghalala Munthali said the Malawi 2063 and MIP-1 recognised that various challenges and risks will be experienced, including harsh weather patterns such as the cyclones and droughts as well as external and domestically-induced shocks.

However, economist Gilbert Kachamba said Tropical Cyclone Freddy will affect the country’s development aspirations.

He said: “Some people have lost the means of earning a living due to the cyclone, infrastructure has been heavily damaged and needs urgent rebuilding which will cost the nation some fortune.

“The damage was just too much and way beyond expectations. And recovery will cost us much hence negatively affect development aspirations.”

In the 2022/23 Budget, statement Treasury had projected growth to rebound to 2.7. However, Reserve Bank of Malawi Governor Wilson Banda recently said the 2.7 percent projection will be revised to incorporate effects of Tropical Cyclone Freddy. n