The Reserve Bank of Malawi (RBM) on Thursday slashed its Malawi economic growth projection for 2022 to 1.7 percent from of an earlier 4.1 percent estimate at the back of weather shocks and impact of the Russo-Ukrainian War.
According to a statement from the 3rd meeting of its Monitory Policy Committee meeting, after showing signs of a promising recovery, the domestic economy is experiencing a downturn.
The central bank says and on a preliminary basis, economic growth is expected to decelerate to 1.7 percent in 2022 from an estimated growth of 3.9 percent in 2021.
“This is reflecting the impact of the erratic rains experienced in some parts of the country, tropical storms Ana and Gombe which hit the country in January 2022, low supply of foreign exchange, and the impact of the Russia-Ukraine war which have all resulted in lower-than-anticipated sectorial production,” reads the statement.
Due to disrupted supply chains on the global market, prices of various commodities including food have been on an upward spiral, pushing domestic headline inflation to 23.5 percent in May.
Economist from the Malawi University of Business and Applied Sciences Betchani Tchereni said the agriculture is among the hard hit, and this would reflect on the economic growth.
He then called on the authorities to work towards diversifying the economy as a medium to long term remedy.
“We need to diversify within and outside agriculture because we have seen how depending on the current system of agriculture alone is not helping the country and aside from that, we have to make sure that we industrialise this economy by using funds that are readily available such as the pension funds,” he said.
Another economist who also serves as a Director at Centre for Research and Consultancy Milwad Tobias said the earlier GDP growth estimate by the government was unrealistic.
He said with such a slash on the growth projection, the budget implementation will also be affected because revenue targets will not be met.
“Apart from diversifying agriculture in the medium to long term, we need to restore power as a short term solution so that production is enhanced otherwise the economy will continue going down,” he said.
The 2021-22 farming season faced numerous challenges including delayed rains and storms that swept away fields that Malawi’s staple food, maize and main cash crop tobacco have dropped in output.
The earlier 4.1 percent economic growth projection was premised on a possible increase in economic activities following the ease in Covid pandemic.
The government anticipated mining and quarrying, manufacturing, transportation, construction, and wholesale and retail sectors to peak up. Ironically, almost all the sectors were reportedly sluggish in the first half of 2022.
Justin Mkweu is a fast growing reporter who currently works with Times Group on the business desk.
He is however flexible as he also writes about current affairs and national issues.