Anti-Bakili Muluzi / MALAWI POLITICS TODAY

Bank upbeat on Malawi 8.2% GDP growth
by Taonga Sabola, 18 January 2006 - 04:35:42

Malawi is on course to achieve the targeted 8.2 percent real Gross Domestic Product (GDP) growth rate this year, National Bank of Malawi (NBM) has said.But the bank has warned that the countries past economic ills will continue to haunt Malawi, one of the world’s 10 poorest countries.In its January Economic Newsletter, the bank noted that agriculture will continue to influence economic recovery, given the lack of economic diversification and natural resources that can be exploited.Despite last year’s drought cutting agricultural production by 24 percent, NBM said the sector should begin to recover in 2006 buoyed by the increased fertilizer use and the general good weather conditions.“However, the accumulated effect of the recent years of weak economic performance and drought in the previous growing season will continue to haunt the country for some years to come due to lagging spill over effects,” the bank said.The manufacturing sector, according to the bank, will continue to be driven by developments in agriculture, as food processing forms a large component of manufacturing.NBM added that coal—which is expected to pick up significantly following the opening of several mines across the country—will also drive growth in the mining sector.“But as this rise will be from a very low base, it will have very little impact on headline growth,” the bank said.Services are expected to benefit from an expansion in government spending owing to the resumption of donor financial assistance.Donor support is also expected to keep growth in the construction sector.If achieved, the 8.2 percent growth for 2006 will be the highest in democratic Malawi and the first to out pace the six percent bench mark that experts say is required to have an impact on a country’s poverty levels.Last November, analysts expressed mixed views on the country’s ability to achieve such a growth target with some saying the projection was too ambitious while the more optimistic ones believed it to be possible.In 2004, Malawi’s economy expanded by 4.6 percent, faster than the 3.9 percent recorded in the previous year.Finance Minister Goodall Gondwe said in his last budget statement that although GDP expansion was projected to slow down to 2.1 percent last year due to dry spells which suppressed agricultural productivity, he expected a rebound this year.Agriculture, which accounts for around 40 percent of Malawi’s GDP, would help achieve the 8.2 percent growth target as long as good weather prevailed.Improved fiscal management, low interest rates, stable exchange rates and a higher investment ratio owing to large capital expenditure planned for the current fiscal year, were also tipped to help reach the target.

-story by the nation