RBM re-affirms slow GDP growth in 2023
Reserve Bank of Malawi (RBM) has re-affirmed that the economy would slow this year as economic recovery faces some headwinds, mainly due to agricultural shocks.
The central bank expressed the fears in its second Monetary Policy Committee Statement issued recently indicating that the 2.7 percent projected gross domestic product (GDP) growth rate for 2023 is likely to be revised downwards.
Reads in part the report signed by RBM governor Wilson Banda: “Prospects of the 2023 domestic economic recovery faces some headwinds, following the impact of the cyclone Freddy and localised drought which are expected to yield a lower-than-initially projected agricultural output.”
“[This is] In addition to the impact of limited access to fertilisers during the 2022/23 crop production season and prolonged electricity power cuts at the beginning of 2023 as well as protracted foreign exchange supply shortages which are expected to dampen non-agricultural output.”
Malawi’s economy has been significantly weakened by a series of exogenous shocks and persistent macro-fiscal imbalances.
Meanwhile, the World Bank has slashed Malawi’s 2023 GDP growth rate projection to 1.6 percent, a development the Bretton Woods institution says is due to the fact that economic recovery will be gradual with significant risks remaining.
Following Tropical Cyclone Freddy, which hit the country’s Southern Region over a month ago, there has been loss of life and property and disruption of business.
Apart from disrupting water and electricity services, the cyclone also disrupted service delivery in government offices.
The disruption came at a time agriculture production was expected to pick up with favourable weather conditions expected in the 2022/23 growing season as reflected in the crop and animal production subsectors which were expected to grow by 3.5 percent compared to one percent last growing season.
Catholic University of Malawi economics lecturer Hopkins Kawaye, in an interview, also admitted that the damage caused by Tropical Cyclone Freddy, especially on agricultural produce is a cost to the economy.
“As an agro-based economy, where if produce is affected in any other way, inflation is definitely affected. It is, therefore, expected that as crops have been destroyed and economic activities disrupted as well, food prices will go up. Overall, as economic activities slow down, the GDP is, indeed, likely to slow,” he said.
Local investment firm Bridgepath Capital Limited in its assessment of the economic costs of the Cyclone Freddy also indicated that the loss of production and disruption to supply chains may have a further effect on other sectors of the economy, exacerbating the economic down-turn.
The firm said disruption in agriculture and other productive work due to the cyclone may lead to a decline in the country’s GDP. .
