Collapse of confidence in Malawi economy – Legatum Institute

Malawi is getting gloomier about the economic future again as London based Legatum Institute has told Nyasa Times that the country dropped 12 places in the 2014 Legatum Prosperity Index, which measures the human and economic prosperity of nations around the world,  due to a decrease in a number of objective and subjective variables.

Malawi is ranking low in the economy sub-index from being 16th amongst 38 African countries in 2012 to 34th in 2014. Its score decreased from -0.9050307 to -2.229171 in this period.

“This is due to a decrease in a number of objective and subjective variables. Objective macroeconomic indicators have worsened in the country since 2012,” explained Solène Dengler research analyst at the Legatum Institute in a response to Nyasa Times questionnaire.

“Gross domestic savings decreased from 8.2% to 5.6% of GDP,” disclosed the research analyst.

“Non-performing loans went up from 3.2% to 6.4% of total loan.   Inflation rate increased from 7.4% to 27.3%,” she added.

Malawi’s average 5-year GDP per capita growth rate decreased from 4.2% to 0.2%, said Legatum analyst.

According to the institute, subjective indicators have also worsened.

“Over 50% of the population believes that economic conditions are getting worse in the economy in 2014 (more than 50% believed economic conditions were getting better in 2012),” the Institute said.

“The percentage of people who believe that it is a good time to find a job went down from 46% in 2012 to 41% in 2014,” Dengler told Nyasa Times.

She also disclosed that “the percentage of people who said they had adequate food and shelter decreased from 56% in 2012 to 49% in 2014.

“The percentage of people who are satisfied with their standard of living went down from 64% in 2012 to 39% in 2014.”

Legatum Institute’s 2014 Prosperity Index  measures a set of eight categories that reveal how nations perform both economically and in vital areas of education, health, personal freedom, safety and security and entrepreneurship.

Meanwhile, Malawi’s Finance, Economic Planning and Development Minister Goodall Gondwe has conceded the country’s economy is passing through ‘turbulent times’, citing a sharp fall in the kwacha against other major currencies, huge amount of domestic borrowing and uncertainty over the resumption of budget support.

“Nobody would say we have normal economic performance for a country with a huge amount of domestic borrowing, a country with a huge amount of arrears, that we inherited, of more than K100 billion, a country whose donors withdrew budget support,” Gondwe is quoted by  Malawi flagship daily, The Nation.

“What is important is to sit down and look at the problems we are in,” he said.

IMF mission chief to Malawi Oral Williams said despite persisting economic woes, the domestic economy has demonstrated strong signs of considerable resilience.