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Af DB projects 3.3% GDP growth in 2021

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The African Development Bank (AfDB) has said it expects the local economy to grow by 3.3 percent this year.

The bank made the projection in its 2021 African Economic Outlook released on Friday, predicting that the local economy would swell by 6.2 percent in 2022.

The AfDB projection is 0.2 percentage points lower than the 3.5 gross domestic product (GDP) growth projection made by Finance Minister Felix Mlusu when presenting the Mid-year Budget Statement to Parliament recently.

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Growth in Malawi’s economy decelerated in 2020 to 1.7 percent from 5.7 percent in 2019, driven by the Covid outbreak, which necessitated a partial lockdown of the economy, resulting in subdued economic activities— mainly in tourism, the accommodation and food subsectors, transportation, and agriculture.

The AfDB report states that prospects for a recovery to the pre-pandemic level are not expected until 2022, mainly because of the uncertain effect of Covid infections.

The projection augers well with the opinion of most economic experts, who say Malawi’s economic growth prospects for 2021 remain uncertain, mainly due to the second wave of Covid.

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Since the beginning of 2021, the Covid infections and fatalities were increasing sharply, a development which compelled the government to re-impose strict containment measures.

As a result, domestic economic activity, which started to rebound in the second half of 2020, has moderated.

This has also piled pressure on government operations, with a reported mismatch between expenditure and revenue, leading to rising public debt.

In the report titled From Debt Resolution to Growth: The Road Ahead for Africa’, the AfDB also says fiscal deficit is projected to widen to 10.2 percent in 2021, raising the debt-to-GDP ratio to 66 percent in 2021.

It says the current account deficit is forecast to narrow to 12.5 percent of GDP in 2021 as exports rebound, then tick up to 12.9 percent in 2022.

Traditionally, the domestic debt market has covered government financing needs. Since 2012, Malawi has experienced frequent weather-related shocks, resulting in persistent fiscal imbalances and elevated public debt levels.

The emerging financing gap of $243 million (2.9 percent of GDP) in October 2020, combined with the Covid financing needs of 3.9 percent of GDP, will be financed from external sources, domestic debt, and official reserves—also projected to improve to 3.3 months of imports in 2021 from 3.1 months of imports in 2020.

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