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World Bank sees Malawi poverty curve rising

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The Malawi Economic Monitor (MEM), a bi-annual publication by the World Bank, has predicted that 880,000 Malawians could go beneath the poverty line if the economy shrinks as predicted due to the Covid-19 pandemic.

This comes against a background of the government revising downwards growth projections for 2020 from 5.5 percent to 1.9 percent due to impacts of the pandemic.

However, the projection is based on a perception that the pandemic will be contained by September but if it persists until December 2020, the economy is expected to shrink to -3.8 percent.

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According to the World Bank GDP growth in 2020 is expected to slow sharply to a baseline of 2.0 percent.

The baseline assumes that Malawi will not experience a full national lockdown and that the brunt of the external demand shock and disruptions to domestic activity are felt in 2020 and not into 2021.

The bank holds that the poverty impact will be particularly acute in urban areas where the sizeable informal services sector is expected to be heavily affected.

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“Within the services sector, accommodation and food services as well as wholesale and retail trade are likely to be significantly affected if Malawi experiences wider community-level transmission.

“The forecasted increase in urban poverty could range from 1.6 percentage points representing around 280,000 Malawians in the baseline growth forecast, up to 4.9 percentage points around 880,000 people in the downside scenario,” reads the publication in part.

It further says given the strong harvest and the agriculture based rural economy, in the baseline scenario rural poverty may see limited impact however, in the downside case scenario, vulnerability to falling below the poverty line could increase by 2.2 percentage points in rural areas.

In an interview Sunday, Dean of Commerce at the Polytechnic, Betchani Tcheleni, said Covid-19 is eroding away the middle class where many are drifting away into the poverty tier.

He said poverty levels may rise and prospects of rebound in the economy will be difficult.

“Fiscal pressures might lead to high appetite to borrow by the government in order to fulfill government mandates and obligations. This may lead into macroeconomic instability which can scare away both domestic and foreign direct investment. Without proper cushions for Covid-19, urban and rural poverty will worsen, only a few people will be working decently,” Tchereni said.

Poverty and inequality remain stubbornly high in Malawi with the national poverty rate recorded slightly above 51 percent in 2016, but extreme national poverty decreased from 24.5 percent in 2010/11 to 20.1 in 2016/17.

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