Economic think tank forecasts growth at 4.8%

The Economic Intelligence Unit (EIU) has forecast real Gross Domestic Product (GDP) to grow by an average of 4.8 percent annually for the next five years.

In its third quarter country report for Malawi released recently, the EIU predicts that the economy will register a GDP growth of 4.7 percent in 2018, 4.9 in 2019 and 5.0 percent in 2020 before it slows down to 4.7 percent.

After slumping to 2.7 percent in the 2015/2016 financial year on the back of unfavorable weather conditions, real GDP growth is expected to strengthen to 4.4 percent in 2017as the agricultural sector recovers.

But the EIU said low investment will, however, keep a lid on growth, amid relatively tight monetary policy conditions and weak investor sentiment.

Assuming normal weather conditions, the EIU says it “expects real GDP to average 4.8 percent a year in 2018-21 as the crucial agriculture sector registers steady—albeit not spectacular—growth.”

In reaction, Dean of Social Sciences Department at the Catholic University, Gilbert Kachamba, said the EIU projections are a true reflection of what the future holds for Malawi.

“We have bumper yields now hence, the GDP growth of five percent but, next year, as the weather forecast is projecting bad weather, we expect the GDP growth to go down,” he hinted.

Kachamba further indicated that in 2019, expectations are that the GDP growth would go down further as, “We will be having Tripartite Elections and this, to some extent, may have an effect on the economic land scape.”

He said in line with the EIU forecast, in the country is expected to show some stability and growth in 2020 and afterwards.

Kachamba said, unless the system revisits its priorities, sustaining a substantial economic growth pace was unlikely.

“Unfortunately for Malawi, the sustainability of our economic growth lies above our reach. The agro-based economy, which heavily relies on rainfall, is difficult to sustain,” Kachamba said.

He said the private sector needs to be given a boost and the system needs to create an environment where the private sector can flourish without political attachments to ensure sustainability and continuity.

Meanwhile, the EIU report shows that growth in the industrial sector is expected to remain fairly lackluster.

For instance, the report shows that coal production, which has fallen by 75 percent since 2014, is unlikely to re-emerge as a key driver of growth in 2017-21, since Malawi’s mines will struggle to compete with those in neighbouring countries.

The report also shows that there is an upside risk that uranium production will resume during the forecast period.

However, since Malawi is a high-cost operating environment, it is unlikely that international prices will rise sufficiently to justify bringing the Kayelekera Mine (the country’s only operational mine) back on stream

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