RBM slashes GDP growth to 2.3%

The Reserve Bank of Malawi (RBM) has finally slashed this year’s economic growth rate projection to 2.3 percent from an initial 3.3 percent projection largely due to lower-than-expected agricultural output this year.

The World Bank, International Monetary Fund (IMF) and the African Development Bank already revised downwards the country’s gross domestic product growth (GDP) rate projections as the fiscal and monetary authorities stuck to their optimism.

Speaking during the Tama Farmers Trust annual conference in Lilongwe yesterday, RBM director of policy research Kisu Simwaka said the economy will slow down than earlier projected.

But he said there are signs of recovery manifesting in the economy and it is set to grow by 4.3 percent in 2025.

Said Simwaka: “We have had a number of weather-related shocks and others that brought down growth.

“Assuming that next year we will not have weather challenges, the 4.3 percent growth rate is quite possible.”

He also explained that there are a number of industrial activities that are happening, giving the central bank confidence for higher growth next year.

“In the mining sector, there are a number of activities coming up. In the agriculture sector, there are mega farms coming up and in tourism also there are a lot of things that are happening,” said Simwaka.

An earlier assessment by the IMF’s mission indicated that weather-related shocks continued to impact the country’s economy, thereby exacerbating food insecurity.

Reads the IMF assessment: “The economic outlook for 2024 remains positive, but economic growth is now projected at two percent reflecting the impact of El Nino on agricultural production and spill-overs to the rest of the economy.

“A successful winter crop would cushion the impact of the drought on the agriculture sector.”

However, Simwaka said there is worry over food inflation, which is rising faster at a time non-food inflation is stabilising, but was hopeful that there will be stability soon.

The central bank sees tobacco earnings this year stabilising the foreign exchange situation and projected $400 million (about K700 billion) revenue from the   country’s top foreign exchange earner, the highest in 13 years.

Tobacco has already fetched $327 million (about K572 billion), with almost 80 percent of the leaf sold.

However, Tama Farmers Trust president Abiel Kalima Banda while recognising the increased revenue bemoaned the dwindling tobacco volumes, falling short of demand for the past four years.

This year, tobacco volumes are estimated at 140 million kilogrammes (kg) against the buyers’ demand of 160 million kg.

He said: “The reduced volumes can be attributed to weather-related factors alongside poor prices previously.

“But we are hopeful for increased output following good prices being offered on the market this year.”

Despite the reduced volumes, tobacco has been strengthening its position as the country’s top forex earner from 49 percent in 2019 to 66 percent in 2023, according to Simwaka.

Tobacco is the country’s main foreign exchange earner.

In August 2023, Malawi ratified the World Health Organistion Framework Convention on Tobacco Control, which is a crucial international treaty designed to address the severe public health risks associated with tobacco consumption and exposure to tobacco smoke.