The Reserve Bank of Malawi (RBM) has revised downwards Malawi’s national output as measured by real Gross Domestic Product (GDP) for 2015 by 0.4 percentage points from 5.8 percent to 5.4 percent.
According to latest Monetary Policy Committee (MPC) minutes released Wednesday, the four percentage points revision in the growth rate has been necessitated by a contraction in agriculture due to late on-set of rains, floods and early cessation of the rains.
“The downward revision has been necessitated by a contraction in agriculture due to late on-set of rains, floods and early cessation of the rains,” said RBM Governor Charles Chuka.
Chuka was, however, quick to note that the final impact of the drought on GDP is yet to be ascertained.
An estimated 89 000 hectares of cropland was destroyed by the floods, representing around 2.4 percent of total agricultural land in Malawi.
Chuka said the central bank has observed that inflation continued the downward path to 18.2 percent in March 2015 from 24.2 percent in December 2014, in line with the bank’s projections.
He said inflation is expected to “trend downwards to around 15 percent by June 2015 on account of the stability of the kwacha and favourable international oil prices.”
One of the country’s commercial banks, First Merchant Bank (FMB), indicated last month that Malawi was unlikely going to meet its 2015 economic growth projection of 5.8 percent.
“Reduced agricultural output may have negative consequences both for the country’s balance of payments and its fiscal deficit.Accordingly, although interest rates may decline over the course of 2015, overall monetary policy is expected to be contractionary,” said FMB in a statement of financial position for 2014 signed by Group Managing Director Dheeraj Dikshit and Finance Director John O’Neill.
The World Bank estimated that the recent floods would cost the economy 0.56 percent in 2015 or roughly K12 billion based on the nominal GDP figure estimated at K2.2 trillion. The World Bank also projected the economic growth to be 5.1 percent.