Business

Questions over growth estimate

The Economics Association of Malawi (Ecama) has recommended a revision of the 2016/17 real Gross Domestic Product (GDP) growth estimate from 5.1 percent to 2.7 percent.

Ecama says the figure would be more realistic based on poor harvest and other trends in key macro-economic fundamentals such as inflation.

The proposition is closer to the estimate made by the International Monetary Fund (IMF) which expects the Malawi economy to grow by three to four percent, subject to weather conditions.

Presenting the budget statement to Parliament Finance Minister, Goodall Gondwe, projected that the economy would grow by 5.1 percent in the 2016/17 financial year .

But Ecama says considering the instability in key macro-economic indicators, it would be more prudent to lower the growth forecast.

“Unless the Minister of Finance [Gondwe] provides an indication as to where he sees the economic growth of 5.1 percent coming from, it might only be prudent to adjust the 2016 economic growth in line with the IMF projection,” Ecama President, Henry Kachaje said.

Kachaje said the economic outlook remains gloomy based on a poor harvest which will see almost half the population being food insecure.

“About 52 percent of the country’s headline inflation is food inflation and it is unlikely that inflation will go down in the next few months with the prevailing rising food prices,” he said.

Kachaje said the other challenge in meeting the target is poor domestic revenue mobilisation by the Malawi Revenue Authority.

In an earlier interview, former president of the Malawi Confederation of Chambers of Commerce and Industry, Matthews Chikankheni, said such factors make it a challenge for Malawi to stabilise the economy and achieve a favourable macroeconomic environment.

He said as inflation rates have remained stubbornly high driving interest rates even higher, the business operating environment has equally remained harsh making it difficult for most organisations to be profitable.

“Generally, business has been very difficult as you are aware that the macro-economic conditions in the country are not that favourable to business. This would have a huge impact on the economic growth projection,” he said.

But in its Economic Review for 2015 released in April, The Reserve Bank of Malawi estimates the Malawi economy to rebound and register growth of 5.8 percent in 2016 on the assumption of normal harvesting season and a more stable macro-economic environment.

RBM is optimistic that the agriculture sector will grow by 5.2 percent in 2016 and that tobacco production will increase by 9.5 percent.

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