IMF Trims Malawi Growth Forecast To 4%
The International Monetary Fund (IMF) has reduced the country’s 2018 GDP growth forecast to four percent against government’s projected 4.5 percent.
The IMF in its April 2018 World Economic Outlook (WEO) put Malawi alongside other African countries with deteriorating growth in their real gross domestic product (GDP) growth projection for 2018.
IMF Resident Representative, Jack Ree said the forecast is just close to what the Reserve Bank of Malawi (RBM) estimated; adding the reduction in the forecast is due to irregular rainfall pattern and the spread of fall armyworms.
“That said, IMF’s growth estimate tends to be on the conservative side, especially in countries with an IMF programme as it is safer to build in growth rate that is well within reach than be surprised on the positive side. This [growth forecast] reflects the effects of suboptimal rain patterns this maize season and delayed resolution in power shortages,” said Ree.
The projected four percent growth is a drop from 5.1 percent chalked in 2017, which was a rebound from a subdued 2.7 percent growth in 2016 driven by above average agricultural yield in 2016/17 growing season.
On the other hand, the Economist Intelligence Unit (EUI) has put this year’s growth forecast at 3.6 following a reduction in 2018 maize harvest forecast.
Ree said the 2018 growth translates that means that it will take some more time for growth to get back to its full medium-term potential despite the fact that the economic recovery will continue this year.
He said given that final crop estimates are yet to be released, it is too early to nail down this year’s growth number which is largely based on agriculture output.
He said expectation on the growth rate of between six and seven percent is based on the confidence on the back of macroeconomic stability and structural reforms which are premised on the new Extended Credit Facility (ECF) programme.
In March, Treasury revised downwards the 2018 growth projection to an average of 4.5 percent. Initially, Treasury had projected a six percent growth rate for 2018.
This fiscal year, growth prospects have been dealt a big blow largely due to the combined effects of dry spells, fall armyworms that is expected to cut output and incessant power outages that continues to affect revenue collections by Malawi Revenue Authority (MRA).