Positive economic outlook  for Malawi amidst threats

Malawi’s is certainly facing a positive economic outlook that could result into an improved environment in the later months of the year 2017 but significant threats still exist that may bring back the country on the vicious circle of economic malaise going forward.

President Mutharika: Positive outlook

Malawi’s current rate of inflation at 16.10 percent is the lowest since February 2013 when it was recorded at an all-time high of 37.90 percent.

The inflation rate in Malawi has averaged 15.31 percent between 2001 and 2017, with the highest in February 2013 and the lowest 6.30 percent in December of 2010.

A consistent slowdown in inflation and stability of the Malawi kwacha since the beginning of the 2017 has been joined by the onset of the tobacco market and a good harvest of maize and almost all food crops and this is expected to further reduce inflation and stabilize the Malawi kwacha in the next few months.

It would therefore not come as a surprise if new Reserve Bank governor, Dalitso Kabambe, starts his job with an announcement of a further cut in lending rates which was recently reduced to 22 percent from 24 percent by the central bank.

Meanwhile, things are also looking good in revenue collection where the Malawi Revenue Authority (MRA) has reported a surplus of 2 percent for the month of March 2017 when K53.7 billion was realized against the month’s target of K52.48 billion.

MRA has since recorded a total revenue collection of K502.47 billion for the 2016/2017 financial year up to March 2017, against a projected figure of K463.7 billion for the period.

And the Malawi Stock Exchange (MSE) has returned to bullish times, with 8 of the 13 listed companies registering impressive profits while only two – NBS Bank and National Investment Trust Limited (NITL) have declared losses. Blantyre Hotels Limited (BHL), Illovo and Old Mutual are yet to announce their latest results.

Such is the buoyant run of the Malawi economy that both the International Monetary Fund (IMF) and the World Bank have forecast the country’s GDP to return to reasonable growth in 2017 – albeit with different projections by the two Bretton Woods institutions of 5 percent and 4.2 percent respectively. The Malawi government is even more optimistic and expects the local economy to grow by 6 percent in 2017. All the projections, however, represent an increase from the low 2.6 percent growth recorded in 2016.

While the London-based Economic Intelligence Unit (EIU) has forecast Malawi’s headline inflation to close the year 2017 at an average 17.9 percent, it is more optimistic about 2018 and expects the same to ease at around 11.2 percent by next year.

With this year’s good crop output and a stable kwacha that survived much of the 2016/2017 lean period without major depreciation as is usually the case, the EIU inflation projection may look realistic if the state of affairs is supported with sound fiscal management by the Malawi government and an urgent address of some major bottlenecks affecting general productivity in the country.

Along the current positive economic run in Malawi are valid risks that could make the current outlook unsustainable.

While Malawi’s growth projection is pinned on improved agriculture production, challenges remain in the industrial and service sectors where factories have been reported to be running on half scale due to prolonged electricity shutdowns being experienced in the country.

Unless the situation is addressed, real economic growth will continue to remain below 6 percent – which is the recommended rate by the World Bank for economic conditions in a country to start trickling down to the masses and help reduce poverty.

Accelerated public expenditure as the government starts electioneering ahead of the 2019 general elections as well as a possibility of increased global oil prices could also undermine efforts to further reduce inflation and lending rates.

While foreign exchange reserves will remain above the international standard of above 3 months of import cover during the tobacco export period up to around October, it is likely to drop to deficit levels after that, thereby bringing back instability of the local currency due to the country’s prevailing weak export base that remains heavily dependent on tobacco.

And with the President Arthur Peter Mutharika’s government’s commitment to fight corruption under serious questions coupled with a slowdown in public financial management reforms, strained relations between Malawi and international donors are likely to prevail, making resumption of external aid to the country very unlikely.

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12 thoughts on “Positive economic outlook  for Malawi amidst threats”

  1. Ekzie says:

    I think Sorry u are sorry indeed,

    It seems your argument is baseless, OK u said sugar in RSA cost R16 at present so does Malawi sugar cost Mk16??

    If you want comparison it shouldn’t be based on the ratio of 16:900 that is based on your exchange rate but it should be base on what R 16 can buy in SA and what Mk16 can buy in Malawi, then u ‘ll be able to understand the logic why people are complaining.
    We complain not for the government to give us handout but if there is any economic turn around( economic growth) then it should benefit us all not just few individuals.

    I don’t understand the logic being used in Malawi when u say inflation is going down but at the same time u hear prices of commodities are going up e.g sugar has gone up.

    Does it mean inflation is going down or up??????
    This question goes to any ecoomist.

  2. winston msowoya says:

    There is no positive economic indication in the country,if it is there,then it is for those with money in sacks,pillow-cases,under the beds,cardboard boxes so on and so forth.It is unbelievable for any nation not to tell its people the truth.Our people in the cities and rural areas are living in the earth-hell,while the leaders are living in paradise.It is sad and heart-breaking that the majority of our people whether in cities or villages,cannot afford to feed their families three times a day,while their money is controlled by a handful of greedy and ruthless so-called leaders including the State President himself.SHAME!!!!!!

  3. Stephano Joseph says:

    Good and plausible development for our country. We need inflation to be kept as low as possible to stimulate growth especially in the private sector which is the engine for robust development in an economy

  4. chkoti says:

    Indeed good on paper.but we know some citizens of our beautiful nation will out spammers to this very good outlook one way or another to sabotage the successes..these are not successes of president mutharika and his party or boys.it should be taken as successes of the nation .omly then and everyone supports this trend will a common person on the village benefit otherwise .we know sabotage is on some peoples minds already..please please fellow malawians.tatopa ndi umphawi lets support each other to get where we are supposed to be..thanks..am happy.

  5. Low inflation does not mean that prices of commodities are low but the frequency of prices changing is low. Our inflation is largely affected by food prices and in this case no one would expect the prices of commodities like maize which is already over priced by ADMARC to go further up. Malawians are continuing to suffer economic hardships; the so called slowed down inflation and increase in the GDP never trickles down to the majority of our population. The positive is only in the economy outlook while the inside outlook is even more negative than before.

  6. Zagwazatha says:

    Nanga mitengo ya katundu bwanji imangokwerabe even when your inflation is getting down? anthu akumudzi phindu lawo ndi chiyani? izi zokomera inutu bwana ku State house kwanuko, koma ife tikuvutika, a PAC sakunama you have failed …. 0.00000001 % KKKKKKKKKKKKKKKKKKKKK.

  7. Inflation is a language for economics. I have at no point seen immediate positive impacts of inflation to indiviadual malawians. Look in this case; even if economists say inflation has come down to 16.10, prices of commodities continue to rise. For example :sugar the very basic conmodity is from this week selling at K900. How can you then convince locals that economy is doing well. Can you site an example where we saw a positive result of inflation in our economy? It’s just economic imagination for the poor who can’t understand it and later on see it’s impact on their lives. Let translate into meaningful economic gain to ordinary malawians than just read in papers and hear this from political platforms.

  8. mada says:

    Great and good

    1. Sorry says:

      In SA brother sugar 1kg is R16 what’s the difference with k900?

      1. chemuyaya says:

        Brother put SA aside we are talking of Malawi here. SA has also a stupid leader just like ours

        1. Sorry says:

          Its a question baba Chemuyaya answer the question not about Zuma..koz to me if u convert that to Mk it means ur buying sugar same way as it is in SA..stop this complaining crap..if its too much thus where people migrate&ur free to do that rather thinking govt will end ur problems.U wouldn’t compare SA economy to Malawi even if it was ruled by a dog.Ok?

  9. Trendex says:

    IT’S A GOOD ACHIEVEMENT MR PRESIDENT. BUT IS A VILLAGER KWA CHE MUSSA BENEFITING FROM WHAT YOU ARE SAYING? THESE ARE MY SILLY THOUGHTS BUT TURN THEM INTO PRUDENT IDEAS OR ELSE YOU WILL JOIN MY BANDWAGON MR PRESIDENT.

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