Malawi GDP growth projected at 5.4 %

The current high inflation and interest rates are some of the major threats to Malawi’s 2014 projected gross domestic product (GDP) growth pegged at an average 5.4 percent by authorities.

Nico Asset Managers’ in the February 2014 monthly economic report, notes that risks to economic growth for the year’s projections include high inflation and lending interest rates which slow down economic growth as they reduce private sector activity.

How can the country boost its manufacturing sector
How can the country boost its manufacturing sector
How can the country boost its manufacturing sector
How can the country boost its manufacturing sector

Malawi’s January inflation rate shot by a staggering 2.4 percentage points to 25.9 percent. The Economist Intelligence Unit (EIU) expects average inflation to fall to 18.7 percent in 2014 compared to 28.6 percent in 2013.

The International Monetary Fund (IMF) raised the end-2014 inflation from 5.8 percent to 9.7 percent while the annual average was increased from 8.1 percent to 15.1 percent.

Comparatively, in the region Malawi has one of the highest inflation rates with the country’s December 2013 Common Market for Eastern and Southern Africa (Comesa) harmonised inflation rate at 23.2 percent, about two times the region’s rate.

The Blantyre-based investment advisory firm notes that although commercial banks reduced their interest rate due to high market liquidity levels to an average of 36.52 percent from an average of 40.52 percent the rates still remain high.

Analysts expect interest rates to fall further to 30 percent due to the improved liquidity levels.

Nico Asset Managers expects short-term interest rates to continue decreasing as seen in the latest Treasury bill results as liquidity levels are still high.

Interbank lending rates—short-term interest rates—fell to an average week decreased to 10.39 percent.

Apart from high inflation and interest rates, the investment management and advisory firm points out that power supply continues to be intermittent and costly economic adjustments may damage productivity.

But late last year, Escom commissioned Kapichira Phase II which added about 64 megawatts to the national power grid increasing the power supplier’s total capacity to 351 megawatts against an estimated power demand of 350 megawatts. However, experts have said the power surplus will be short-lived.

The managers indicate that the shutdown of Kayelekera Uranium Mine might hamper growth.

Furthermore, the Reserve Bank of Malawi (RBM) estimated that the manufactoring sector has experienced a decline, with growth figures dropping from 6.2 percent in 2013 to 5.4 percent in 2014.

As such,authorities  have forecast economic growth to average 5.4 percent in the period 2015-2017 despite the declining potential for raising maize output through fertiliser usage.

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