By William Kumwembe:
The Reserve Bank of Malawi (RBM) last week maintained its five percent economic growth projection for 2019, despite the International Monetary Fund (IMF) lowering its forecast to four percent in the aftermath of the Tropical Cyclone Idai.
The RBM Gross Domestic Product (GDP) growth prospect is higher than the 4.0 percent growth recorded in 2018.
While IMF projects a five percent growth in 2020, RBM feels the country would attain even a higher rate, buoyed by recovery in agriculture sector, improved power supply and macroeconomic stability.
RBM Governor, Dalitso Kabambe, said, with the recent policy rate cut, there is hope that businesses would grow which would influence economic growth.
“We believe the five percent growth is attainable and, going forward, we can even grow strongly if we continue to support the productive sectors of the economy,” Kabambe said.
However, Malawi has registered an average 3.5 percent economic growth in the past five or so years, a rate not enough to bail it out of its current poverty levels.
Malawi is vying with the likes of Burundi, Niger, the Democratic Republic of Congo and the Central African Republic to be officially the world’s poorest country in terms of per capita income, which was under $500 (in real terms) in 2018.
Statistics show that Malawians are three times more poorer than Zambians.
Yet Zambians, who in 2017 earned $1,635 per person (around the sub- Saharan African average), are already very poor by global standards, where the average income was over $10,600.
In a recently issued Paper titled ‘Malawi’s May 2019 Elections; The Need to Align Politics and Policy with the People’s Needs,’ head of Johannesburg-based Brenthurst Foundation, Greg Mills, said if Malawi were to reach lower middle-income status ($996 currently) it will have to grow its economy at an average of 13 percent for the next 10 years, or 6 percent for 30 years.
“To achieve the bottom end of ‘upper’ middle-income status ($3 896–$12 055) will require an annual average of 30 percent growth for 10 years,” Mills says in the report.
The country’s economy is agro-based, highly dependent on rain-fed agriculture and the sector is not resilient to climatic shocks such as drought and dry spells.
Malawi’s challenge, however, has been to commercialise and diversify the industry.
Commentators say a subdued performance in the agriculture sector puts in jeopardy the vibrancy of the manufacturing sector as the former supplies most of the raw materials for industrial production.
Economics Professor at Chancellor College, Ben Kalua, said Tuesday that while attaining a five (and above) percent GDP growth was possible this year; the question rests on attaining sustainable economic growth.
“We need to have a strategic vision of growing the economy systematically. No matter who comes in as a political leader, they should align their ambitions to the overall national plan.
“We need priority infrastructure; including railway, water way, communication network; these things are primary and should be intact and in solid position,” Kalua said.
Kalua hinted on managing population growth if the country were to register sustainable growth.
While GDP h a s increased by 10 times in real terms since 1964, the population increase is reported to have nullified half of the gain.