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Reserve Bank of Malawi maintains 3.8% GDP growth forecast

Revises inflation target

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The Reserve Bank of Malawi (RBM) has maintained forecast for Malawi’s economic growth at 3.8 percent in 2021.

This is contained in a statement RBM Governor Wilson Banda issued on Wednesday at the end of a two-day Monetary Policy Committee (MPC) meeting.

Banda says the domestic economy is projected to grow by 3.8 percent in 2021 compared to a growth rate of 0.9 percent in 2020.

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“The recovery is premised on the rebound of consumer and business confidence, as Covid cases declined amidst relaxation of containment measures.

“This, notwithstanding, the third wave, which hit the country between June and September 2021, may adversely affect the projected outcome,” he said.

Earlier, when presenting the 2021-22 national budget to Parliament, Finance Minister Felix Mlusu projected a real gross domestic product growth of 3.8 percent this year and 5.4 percent in 2022.

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In its World Economic Outlook published recently, the International Monitory Fund said economic prospects remained mixed.

The Bretton Woods institution attributed the foggy outlook to the uncertainty that surrounds the Covid pandemic, which is yet to be over.

In a recent interview, Economics Association of Malawi Executive Director Frank Chikuta said the country’s slow uptake of vaccines could slow down the opening up of the economy.

“If the slow uptake persists then one would expect that economic activity will not open up sooner and that would also have an effect on the level of production,” he said.

The central bank’s stance comes as key macroeconomic fundamentals remained volatile.

The Kwacha, for instance, was seen losing grip against the United States (US) dollar and other currencies, trading at K823.48 to a US dollar.

Inflation was also reported to have been on an upward spiral, rising by 0.5 percentage points in September 2021 to 8.9 percent.

Meanwhile, the central bank says the headline inflation rate is now projected to average 9.1 percent in 2021, representing an upward revision of 0.3 percentage points from the third 2021 MPC.

The 2022 inflation has also been revised upwards from 8.2 percent to 8.9 percent.

“The revisions reflect the impact of the recent increase in domestic fuel pump prices; a higher-than-anticipated rise in maize prices in the fourth quarter of 2021; and persistent disruptions to global supply chains,” the RBM statement reads.

Figures provided show that inflation rate averaged 8.7 percent in the third quarter of 2021 against a projected 8.8 percent during the third 2021 MPC meeting. The rate was lower than 9.1 percent recorded in the second quarter of 2021.

The decrease is attributed to moderation of food inflation rate as non-food inflation rate increased marginally, according to RBM.

Specifically, food inflation rate averaged 10.3 percent during the period under review compared to 11.1 percent in the second quarter of 2021.

On the other hand, non-food inflation rate averaged 7.2 percent in 2021Q3, from 7.1 percent in the previous quarter

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