The World Bank has released its latest Malawi Economic Monitor which shows confidence levels still subdued among investors.
Among others, the report says high interest rates and runaway inflation have continued to eat away returns on private investments seen in the increasing share of non-performing loans.
The Economic Monitor released in Mangochi last week on the sidelines of the Economics Association of Malawi (Ecama) annual conference also says a second year of drought conditions and weak economic growth has had a negative impact on business confidence.
The report, which provides an analysis of economic and structural development issues in Malawi, says the country’s agricultural sector is the most significant contributor to the economy, directly accounting for around a third of Gross Domestic Product.
The bank says agriculture’s contribution to the economy increases if agricultural manufacturing and services are taken into account.
“Thus, weather shocks, including drought or floods have a significant impact on levels of business confidence in the country.
“However, even prior to the impact of the recent flooding and droughts, Malawi’s private sector was struggling with an extended period on macroeconomic instability,” reads part of the report presented by the bank’s Senior Economist, Richard Record.
The publication further says high interest rates and inflation rates have eroded the returns on private investments as demonstrated by the increasing share of non-performing bank loans.
“Increasingly frequent power and water supply shortages in Lilongwe and Blantyre, Malawi’s key economic hubs and the high exchange rate volatility have also sapped investor confidence,” the report reads.
Speaking when he opened the Second Malawi Investment Forum last month, Vice President, Saulos Chilima, described Malawi as the best destination for investors despite some of the challenges rocking the economic boat.
Chilima said the challenges the country is facing provide room for investors to provide solutions and make money.