The Reserve Bank of Malawi (RBM) expects the economy to rebound in 2017 forecasting domestic economic activity to grow by 5.6 percent.
In 2016, RBM projected the economy to grow by 5.1 percent but later revised growth to 2.9 percent.
In its December 2016 Economic Review, RBM attributed the slowdown in economic activity in 2016 to contraction in agricultural productivity following the prolonged spell of El Nino.
According to the Central Bank, erratic water and power supply continue to threaten production and economic activity in the country.
The report also indicates that financial stability risks arising from macroeconomic developments are likely to remain moderate.
“On one hand, economic activity is expected to slowdown in the coming months due to, among others, relatively high interest rates and intermittent power and water supply,” RBM said.
RBM, however, says inflationary pressures are expected to remain subdued largely due to the expected continued slowdown in food prices.
This according to RBM would help improve the economy and influence growth.
RBM also says food inflationary pressures are more likely to be dampened following the current importation of maize.
“On the other hand, non-food inflationary pressures might slightly increase should international oil prices continue to rise,” reads the report.
But Professor of Economics at Chancellor College, Ben Kalua, has warned authorities to stop “having things undone” as has been the case in the past five years saying government should start addressing economic bottlenecks with seriousness and focus to start creating meaningful growth rates.
“If we talk of value addition in Malawi, we need to have energy, water and transport infrastructure. Let’s not get things undone. Let’s get focused on things where we already have potential by maintaining infrastructure like the railway and roads and maximise utilisation,” Kalua said.
He urged authorities to address electricity, water and transport challenges to induce industrialisation, taking advantage of development partners like China that have resources and are ready to help Malawi.
RBM further said while the local currency was less volatile since May 2016, the depreciation still remained a threat to financial stability through rising inflation.
The kwacha frailty continues to expose Malawians, especially low income salaried employees to serious economic hardships as prices of goods and services continue to rise while salaries remain static.
However, the central bank has also warned that external pressures like the expected fuel price rising, slowdown in the regional economy and the Brexit are expected to impact on the countries financial sector and trade.