Growth risks still persist—NICO asset

Investment advisory firm Nico Asset Managers has warned that economic growth risks still persist due to internal and external shocks.

In its 2019 Annual Economic Report released on Wednesday, the firm says Malawi has faced various economic shocks in the past two years which have impacted on  gross domestic prduct (GDP), the broadest measure of economic growth.

 Reads the report in part: “Malawi continues to be vulnerable to climate-related weather shocks, which adversely impact growth.

Floods tend to erode gains and dampen economic growth prospects

“There is also poor public financial management which contributes to higher debt levels and reduce fiscal sustainability.”

The firm further said risks of weak governance and poor policy implementation have been heightened by political impasse following the disputed May 21 Tripartite Elections, which has affected policy reform momentum.

Despite the World Bank and International Monetary Fund (IMF) revising downwards the country’s economic prospects, the Malawi Government has maintained GDP growth rate of seven percent this year regardless of the expected shocks to the economy.

But Nico Asset Managers thinks otherwise.

“This outlook is, however, optimistic considering the susceptibility of the Malawi economy to the continuing risk of weather-related shocks with poor rainfall having the potential to negatively impact both agriculture production and electricity supply,” reads the report.

Taking into consideration these factors and the long-standing issue of intermittent power supply, which affects the manufacturing industry, the firm, quoting Economist Intelligence Unit (EIU), says GDP growth this year will most likely hover around 3.5 percent to 5.5 percent.

The World Bank has put the country’s economic growth at 4.8 percent this year due to weather-related  shocks and political instability.

Minister of Finance, Economic Planning and Development Joseph Mwanamvekha in an interview maintained that the economy will grow by the seven percent on account of planned infrastructure developments and continued focus on growth potential areas such as manufacturing.

In the 2019/20 National Budget statement, the minister said  the economy has continued to register remarkable growth, especially in the agriculture sector.

Earlier, Economics Assocation of Malawi (Ecama) said in a statement that for a country to experience meaningful economic growth, it should not only think out of the box, but also jump out of box and look beyond drivers of the economy.

Traditionally, Malawi is an agro-based economy, with the agriculture sector contributing about 30 percent to the country’s GDP.

Analysts say the growth in the agriculture sector impacts growth in other sectors by providing key inputs for the manufacturing sector.

The sector also determines most household incomes levels which drive demand inhe service sectors.

On the global front, global growth is projected to rise from an estimated 2.9 percent in 2019 to 3.3 percent in 2020 and 3.4 percent   for 2021, according to the International Monetary Fund (IMF) January 2020 World Economic Outlook (WEO) update.

This is a downward revision of 0.10 percent for 2019 and 2020 and 0.20 percent for 2021 compared to those in the October 2019 WEO.

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