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Manufacturing to decelerate in 2016

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The Reserve Bank of Malawi (RBM) says it expects growth in the manufacturing sector to slow by 1.8 percentage points from 3.8 percent in 2015. RBM expects the sector to grow by only two percent this year.

In its Financial and Economic Review released last week, RBM has attributed the slow growth to reduced export demand for processed tea and sugar following the unfavourable weather conditions experienced domestically in 2016.

“Further, sporadic electricity power supply continues to be one of the major challenges for the manufacturing sector in the country and this has led to deteriorating production capacity of most companies as well as high production costs as other companies are using generators for production.

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“In 2017, the industry is projected to grow by 5.3 percent on the assumption that the agricultural sector performance will be favourable,” reads the report.

The Central Bank further says construction is estimated to expand by 3.2 percent in 2016 compared to 3.5 percent in 2015. The decline in growth was explained by stalling of public investment in infrastructure which accounts for a larger proportion of the construction industry.

“In 2017, the sector is projected to grow by 5.4 percent, assuming government will increase investment in physical infrastructure,” RBM says.

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Mining and quarrying activities are projected to register a minimal growth of 0.4 percent in 2016 compared to a growth rate of 1.1 percent registered in 2015.

In 2017, the industry is projected to grow by 1.6 percent on the assumption of the entry of Malawi into the international Extractive Industries Transparency Initiative.

RBM has further predicted information and communication growth rate to decline to 4.6 percent in 2016 compared to 8.6 percent growth registered in 2015.

It says the introduction of excise taxes on internet services in the country has been attributed to the reduction in growth in this sector.

“In 2017, the sector is projected to grow by 4.5 percent as growth potential for the sector remains strong as internet service providers seek to grow their customer base and mobile phone operators have large potential to increase sales of units, internet subscriptions as well as expanding new services such as mobile banking.

“Further, mobile phone operators continue to undertake major investments in infrastructures to support their services,” RBM says.

Reduced growth, according to RBM, will also be recorded in financial and insurance services with the sector expected to grow by 5.5 percent in 2016, as compared to 5.6 percent growth registered in 2015.

“The sector is currently benefiting from high interest rates. The major challenge facing the industry is an increase in non-performing loans. In 2017, the sector is projected to grow by 6.9 percent.

“Growth in the medium term is expected to be driven by an increase in financial inclusion resulting from introduction of new technologies such as mobile banking,” the report says.

Robust growth is expected in the hospitality sector with the growth projected at 5.7 percent in 2016 from 5.1 percent growth registered in 2015.

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