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AfDB projects 2.8% GDP growth in 2022

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The African Development Bank (AfDB) has said it expects the local economy to swell by 2.8 percent this year.

The projection by the AfDB is 0.1 percentage point higher than the 2.7 percent predicted by the International Monetary Fund (IMF) in its World Economic Outlook last month.

It is, however, 1.3 percentage points lower than the 4.1 percent GDP growth projected by Finance Minister Sosten Gwengwe when presenting the 2022-23 National Budget Statement in February.

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In its African Economic Outlook released last week, the AfDB, however, says the economy will swell further by 4.0 percent in 2023.

“Prospects for improvement are anchored on stronger agriculture growth, Covid containment and a successful vaccination programme, and a recovery in tourism, exports, FDI [Foreign Direct Investment] and public investment,” the report reads.

The AfDB expects the monetary policy to remain accommodative.

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This is albeit existing pressure facing the economy and the monetary space which has resulted in the 25 percent devaluation of the local currency, the Kwacha.

In the outlook, the regional lender projects that the current account deficit will still improve from 13.9 percent of GDP in 2022 to 9.3 percent of GDP in 2023, on the back of exports.

It, however, outlines risks facing the economy including persistence of Covid, weather shocks, rising public debt and a worsening fiscal deficit.

The AfDB says the public debt-to-GDP ratio will widen from 59.2 percent in 2021 to 64.3 percent in 2022, moving to crowd out the private sector.

The public debt has remained on an upward spiral to the extent that, between June 2020 and June 2021, total public debt stock went up by 34 percent from the K4.1 trillion to K5.5 trillion.

This represents 59 percent of the country’s GDP, up from 48 percent at the end of June 2020.

Further, the AfDB says inflation will remain relatively high at 11 percent in 2022 due to oil price increases before falling somewhat to 9.2 percent in 2023.

It states that gross official reserves will improve to 1.5 months of imports in 2022 and 2023.

“Malawi is diversifying its exports towards minerals to mitigate the external sector shocks,” the report reads.

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