The Reserve Bank of Malawi has recommended a downward review of Malawi’s medium-term gross domestic product (GDP) target to reflect current economic trends.
But the National Planning Commission (NPC), a government entity mandated to develop national development plans and oversee implementation, believes the current situation requires doing things differently.
Malawi aims to attain a middle-income economies mark at least within the next eight years by 2030, a target it failed to meet for 20 years from 2,000 when it rolled the flopped Vision 2020.
To achieve the target, the country needs to be posting a six percent GDP growth rate in real terms per year on average within the next decade.
But, lately, Malawi’s economy has been riddled with both exogenous and structural challenges which have stifled chances of growth, with the IMF projecting a GDP growth of 0.9 percent in 2022, from an earlier 2.7 percent projection.
The IMF says it expects the local economy to grow by 2.5 percent in 2023 before strengthening further to 4.5 percent by 2027.
Speaking at the Economics Association of Malawi (Ecama) conference last week, RBM Governor Wilson Banda said factors do not permit Malawi’s growth estimate, hence the need for review.
“The theoretical response to this is that other things will be held constant, like we are not suffering from external shocks. And two, we are doing everything that is proposed within the growth strategy. Then the country should attain those high growth rates.
“[But] in practice, it becomes a challenge. So, as a nation, I say we should be aiming at those high growth rates but we should also be mindful of the fact that we are living in the real world and there are all sorts of external shocks that can take us off course,” Banda said.
The World Bank defines lower middle-income economies as those with a per capita income of between $1,006 and $3,955 and upper middle-income economies as those with a per capita income of between $3,956 and $12,235 as of 2018.
Figures show Malawi’s GDP per capita income is at $627 (K649 572) well below neighbouring Zambia, Zimbabwe and Tanzania at $1,120.6 (about K1 million), $1,737.2 (K1.7 million) and $1,135.5 (K1.1 million) in that order.
But NPC Director General Thomos Munthali said the country should not downgrade its growth estimate, and instead, should work towards addressing structural economic challenges.
“I don’t think the issue is about downgrading [the growth projection] because the moment we are downgrading, it means we can’t do anything about it. That is accepting defeat. I strongly believe that the target should remain intact,” Munthali said.
According to statistics, Malawi grew its economy by an average 4.5 percent within a decade to 2019.
The economy grew by eight percent in 2009, 6.9 percent in 2010, 4.9 percent in 2011, 1.9 percent in 2012, 5.2 percent in 2013, 5.7 percent in 2014, three percent in 2015, 2.3 percent in 2016, four percent in 2017, 3.2 percent in 2018 and 4.5 percent in 2019.