The Monetary Policy Committee (MPC) of the Reserve Bank of Malawi (RBM) on Wednesday slashed Malawi’s economic growth prospects for 2015 by 0.4 percentage points from 5.8 percent to 5.4 percent.
Minutes of the second MPC meeting for 2015 held in Lilongwe say 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.
The MPC was, however, quick to note that the final impact of the drought on GDP is yet to be ascertained.
Last month, one of the country’s commercial banks, FMB, also indicated that Malawi was unlikely going to meet its 2015 economic growth projection of 5.8 percent.
FMB said the projection was likely to be missed due to the impact of the agricultural sector of excessive rains suffered throughout the country.
“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.
During the Wednesday meeting, the MPC observed that inflation continued the downward path to 18.2 percent in March 2015 from 24.2 percent in December 2014, in line with RBM projections.
If further said it expects inflation to decline to around 15 percent by June 2015 on account of the stability of the Kwacha and favourable international oil prices.
“However, the Committee noted that the downward trend could be reversed depending on timeliness of the financing options available to government to deal with the impact of the drought,” read the minutes in part.
According to MPC, the country’s monetary policy remained tight in the first quarter of 2015 as money supply growth decelerated to 15 percent in February 2015 from a high of 34 percent in February 2014.
The committee then agreed to maintain the policy rate at 25 percent and Liquidity Reserve Requirement (LRR) at 15.5 percent.
The global economy, according to MPC, is expected to grow by 3.5 percent in 2015 and further pick up to 3.8 percent in 2016.
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