The government has lowered its gross domestic product (GDP) growth projection for 2022 by 2.4 percentage points from 4.1 percent to 1.7 percent.
The outlook remains relatively higher than the 0.9 percent estimate made by the International Monetary Fund (IMF) in its recent World Economic Outlook Report.
But in 2023, the government projects a 2.6 percent GDP growth.
Speaking when presenting the Mid-year Budget Statement in Parliament on Friday, Minister of Finance Sosten Gwengwe conceded that Malawi’s growth prospects for the year have been affected by interrupted global supply chains due to the Russo-Ukrainian War and other structural domestic challenges.
Apart from the global economic downturn, Gwengwe said growth in Malawi has been further hampered by tropical storms Ana which damaged Kapichira hydro power station thereby taking 129.6 megawatts off the national power grid.
“This has heavily affected economic activity especially in the manufacturing sector. Going forward, growth prospects remain positive due to the planned restoration of the Kapichira hydro power station and the agriculture commercialisation drive,” Gwengwe said.
He said the macroeconomic parameters anchoring the 2022-23 national budget have drastically changed in the course of executing the financial plan.
The budget was anchored on assumptions that the real GDP will grow by 4.1 percent in 2022 and 4.0 percent in 2023, inflation rate will average 9.1 percent during the fiscal year, and that the policy rate will be at 12 percent, among others.
But all these targets have been missed.
Instead, the economic growth has been revised downwards to 1.7 percent; average inflation has been adjusted to 23.2 percent while policy rate—the rate at which commercial banks use when borrowing from the central bank as lender of last resort—is now at 14 percent since May.
Also, there have been glaring disparities between revenue and expenditure over the first months of the financial calendar.
At mid-year, total revenue and grants for 2022-23 fiscal year amounted to K937.9 billion against a mid-year projection of K1.003 trillion.
The mid-year outturn for domestic revenues is estimated at K805.8 billion. Of the domestic revenue, tax revenue is estimated at K766.6 billion while other revenue (non-tax) is estimated at K39.2 billion.