World Bank forecasts gloomy economic outlook
The World Bank has painted a gloomy outlook for the economy in the medium-term, a position an economic commentator says poses a serious concern for the welfare of Malawians.
In its December 2022 Malawi Economic Report, the Bretton Woods institution said a lack of sustained economic growth, projected at 0.9 percent in 2022, along with the continuous inflationary pressures and recurrent weather shocks, will make it difficult for Malawi to reduce poverty.
This, the bank said, could result in people living on less than $2.15 (about K2 300) per day remaining at 71 percent in 2022 and 2023, with further external shocks which could result in increasing poverty levels and pushing more people into food insecurity.
Reads the report in part: “Recovery from the Covid-19 pandemic continues to be hampered by the sustained impacts of cyclones in early 2022 as well as persistent economic imbalances. A full recovery of the economy to a pre-Covid-19 growth path is not expected in the near-term.
“Prolonged foreign exchange shortages can have severe and long-lasting effects on the real economy. Businesses have to forego potentially profitable investment opportunities.”
With an elevated inflation rate, Malawian businesses and consumers will likely have to expect higher kwacha prices for imported products, especially fuel, fertiliser and cooking oil, said the World Bank.
It further said in addition to rising inflation, there is a possibility of energy prices rising, which will increase electricity prices and further strain the costs of production.
“Pressures on the macro-economy could create further challenges for the achievement of the government’s fiscal consolidation aims,” said the bank
In the 2022/23 fiscal year, the World Bank projects the fiscal deficit could widen further to 8.6 percent of the gross domestic product (GDP), beyond the Ministry of Finance and Economicf Affair’s revised target of seven percent of GDP in the absence of significant reforms.
In an interview on Thursday, economist Bond Mtembezeka observed that poor performance of the agriculture sector and foreign exchange challenges do not make the economic outlook encouraging.
He said: “Firstly, we are a predominantly agriculture country and it does not seem that the Affordable Inputs Programmes will perform well this year and that will be the second year in a row.
“Secondly, the foreign exchange issue is still on and all sustainable interventions are medium to long-term.”
Mtembezeka said Malawi is battling economic issues on almost all fronts.
Minister of Finance and Economic Affairs Sosten Gwengwe said in an in interview on Thursday that the economy is not growing enough.
“The reasons are global plus our own domestic constraints like forex shortage and energy problems which have constrained even the private sector,” he said.
