IMF maintains growth forecast at 5 %

The International Monetary Fund (IMF) has maintained that it expects Malawi’s economy to grow by five percent this year anchored by strong revenue performance and availability of foreign exchange, among other factors.

IMF mission chief for Malawi Tsidi Tsikata said in Lilongwe last week during a news conference when quizzed to provide 2013 real Gross Domestic Product (GDP) growth rate projection for Malawi in the wake of the prevailing economic uncertainty after aid freeze by most of Malawi’s major donors.

In June this year, Tsikata told Business News that the fund had revised Malawi’s growth forecast from 5.5 percent to five percent on account of revised crop estimates and sentiments by the business community on their challenges.

The five percent projected growth rate is double the rate of growth the country attained last year.

But last week, Tsikata said IMF still maintains the five percent figure and said the Fund draws its optimism from the improved foreign exchange availability and an inducement in economic activity in the country.

Said Tsikata: “We chose not to change growth forecast for Malawi. Of course there were conflicting indications leaning us to underestimate the growth rate but we chose not to.We think the five percent figure is based on the fact that there is a lot of economic activity and based on the sentiments from the business community on the availability of increase foreign exchange.”

Tsikata said IMF was pleased to see rising capacity utilisation in the manufacturing sector which, he said, is likely to anchor the country’s economic growth this year.

In 2012, Malawi’s real GDP growth rate was earlier projected at 4.3 percent, but a slump in agriculture emanating from a weather-related decline in maize production and a halving of the tobacco crop prompted authorities to revise the growth rate downwards to 1.8 percent towards the end of the year.

“Of course, there are other factors [explaining the 5 percent growth rate forecast] because some explanations that we have heard are that there is a strong revenue performance and suggesting that economic activity has picked up,” added Tsikata.

Tsikata also explained that policy reforms initiated in May 2012 have produced positive results.

He cited the introduction of a flexible exchange rate which he said has made foreign currency readily available, allowing the clearing of private sector foreign arrears and the re-establishment of external credit lines.

“In parallel, the automatic adjustment mechanism for prices of petroleum products eliminated costly subsidies and facilitated subsidies and facilitated a steady supply of fuel on the market.

According to the 2013 annual economic report, GDP is projected to grow by 6.1 percent in 2014 given the reforms implemented in 2012 through the Economic Recovery Plan (ERP) and expectations that the macroeconomic environment will have stabilised.