Business News

Firm cautions on GDP use as measure of economic performance

Local investment and advisory firm has cautioned the use of Gross Domestic Product (GDP) as a measure of economic performance pointing that there are issues of distribution, industrialisation  and employment which must also be considered if economic growth is to be meaningful.  

Alliance Capital Limited in its recent weekly advisory said it is good to introduce a new measurement of economic growth performance beyond growth figures saying economic performance must go beyond GDP growth.

Grain impacts heavily on the country’s economy

The firm noted that inching up GDP figures—the total monetary value of all final goods and services that have been exchanged within a specific border over a set period of time— does not always mean improvement in people’s lives.

“Economic growth in the Malawian context must be accompanied with diversification from overdependence on tobacco, continued export competiveness of products and a plan must be set in motion to put Malawi on a technology acquisition from a mastery pack,” said the firm.

Traditionally, Malawi along with countries worldwide has used the GDP as a measure of economic growth which was initially developed in the United States (US) in early 1930s.

This year, government is projecting the economy to grow by seven percent, banking on good rains to achieve the ambitious projection.

Last year the ministry of Finance, Economic Planning and Development revised downwards  the 2017 and 2018  growth projections to an average of four and 4.5 percent, respectively from the initial 6.4 percent and six percent on account of poor agricultural output.

The poor output largely resulted from dry spells and fall armyworms, which according to the second round Agricultural Production Estimate Survey, maize production is estimated to have declined by 19.4 percent from 3.5 million metric tonnes recorded in 2016/2017 growing season to 2.8 million metric tonnes in the 2017/18 growing season.

Maize is Malawi’s staple grain that traditionally impacts the country’s economy given its skewed influence in determining inflation rates constitutes 45.2 percent in the consumer price index (CPI) that determines the average rise in the cost of living.

The firm further argues that in an economy where the government is the biggest and most lucrative client, the government must ensure it implements policies which will lead to the development of the industrial capacity of local firms to compete on the international market.

“One of the ways it has to do this is to negotiate and renegotiate some of the agreements it made commitments to which are stacked against the flourishing of local infant industries. This among other policies will enable stakeholders to effectively measure their contribution to the development of Malawi,” said the firm. n

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