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Report reaffirms Malawi’s GDP growth

Malawi’s economic growth will this year be driven by a marked rebound in the agriculture and manufacturing sectors, according to the African Economic Outlook (AEO) 2013, released on Monday.

The AEO is produced annually by the African Development Bank (AfDB), the Organisation for Economic Cooperation and Development (OECD) development centre, the Economic Commission for Africa (ECA) and the United Nations Development Programme (Undp).

The agriculture sector, according to the report, is projected to expand by 5.1 percent in response to improved price incentives for tobacco production from exchange rate adjustment and recent policy initiatives to promote contract farming for commercial crops and expand production of cotton, rice, pulses and legumes.

On other hand, manufacturing is projected to grow by 11.2 percent, driven by growth in agro-processing, consumer goods and cement.

The mining sector is also expected to grow by 14.1 percent, boosted by expansion in coal, quarry and cement production and the expected commissioning of the Kanyika Niobium Mine.

“Over the medium to long-term, mining is poised to increase its contribution to the Malawian economy, as new mines are established and the Kayelekera Uranium Mine enters its second production phase,” says the report.

But the report bemoans the reduced consumer demand due to rising prices and continued power outages, which is likely to pose a risk to manufacturing sector growth in 2013.

On the overall, the report says the continent’s economic outlook for 2013 and 2014 is promising, confirming its healthy resilience to internal and external shocks and its role as growth poles in an ailing global economy.

Africa’s economy is projected to grow by 4.8 percent in 2013 and quicken further to 5.3 percent in 2014.

But the report shows that this growth has been accompanied by insufficient poverty reduction, persisting unemployment, increased income inequalities and in some countries, deteriorating levels of health and education.

As has been projected by the International Monetary Fund (IMF), the Malawi Government and Economist Intelligence Unit (EIU), the country’s real gross domestic product (GDP) in 2013 and 2014 is expected to rebound. The AEO has put growth this year at 5.5 percent and 6.1 percent in 2014.

Finance Minister Ken Lipenga said in the 2013/14 budget the economy expanded by a lukewarm 1.8 percent.

The report, which has commented on various issues on the economic front, says since the coming onto the scene of the first large-scale commercial mining operation, the Kayelekera Uranium Mine in Karonga, interest in Malawi’s mining sector by foreign mining companies has grown, leading to expansion in mineral exploration.

“The government plans to establish more mines over the next decade. A niobium mine at Kanyika is expected to be operational by 2014. It has also awarded rights for oil prospecting in Lake Malawi. However, prospecting for oil has been put on hold pending resolution of the territorial dispute with Tanzania,” says the report.

The AEO says foreign exchange earnings from uranium are projected to reach $200 million by 2014, but has warned that without sound governance and regulatory frameworks, the rent from mineral exploitation could turn out to be more a curse than a driver of growth.

As an agro-based economy, Malawi has managed to earn high return from its cash crops, particularly tobacco, during the periods of high commodity prices.

But over-dependence on agriculture, weak conservation practices and dependence on fossil fuels for energy in rural areas has resulted in natural resource degradation.

Chief economist and vice-president of AfDB, Mthuli Ncube, is quoted as saying that now is the time for Africa to grow even more.

He said: “After 10 years of improved stability, sound macroeconomic policies and blossoming trade links, growth has made African nations freer than ever to choose their own development paths and implement active policies for economic transformation.”

Ultimately, transformation means opening opportunities so people can find jobs, create businesses, as well as invest in health, education and food security. In turn, higher levels of human development for all, including the most vulnerable, can accelerate the pace of economic transformation, leading to a virtuous cycle of growth and development.

 

 

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