The World Bank has highlighted constraints to the country’s economic growth despite it registering positive trends on macroeconomics front.
In three years, Malawi’s inflation has fallen from 24 percent to 8.4 percent as of September 2017, and interest rates have dramatically fallen and the base lending rate also declined to 18 percent by July, 2017.
The country’s exchange rate has been stable for over two years. Further, preliminary forecast for 2017 economic growth rate is likely to be higher than the 5.5 percent that was estimated earlier.
The rate of growth could be the highest in the SADC region. And Malawi is fast rising on the global doing business index.
However, a new Country Economic Memorandum for Malawi released by the World Bank Group has outlined key constraints to the country’s economic growth, with a stern call for an immediate repositioning to reverse negative outcomes.
The challenges include microeconomic instability and poor fiscal management, lack of change in the agriculture sector and constraints to private sector development, which are leading to limited employment creation.
According to the World Bank, authorities need to improve understanding of the puzzle of Malawi’s weak performance and identify ways for Malawi to achieve robust and stable growth.
The report indicates that, despite decades of development efforts supported by significant amounts of foreign aid, Malawi has experienced weak and volatile economic growth over a sustained period of time and has fallen behind its peers.
Malawi’s real per capita gross domestic product grew at an average of around 1.5 percent between 1995 and 2015, falling below the average of 2.67 percent in non-resource-rich sub-Saharan African economies.
“Moreover, growth has been distributed unequally, with little impact on poverty,” part of the report, titled ‘From Falling Behind to Catching Up’, reads the report in part.
One of the authors, , Priscilla Kandoole, an economist working with the World Bank, said the burden of financing such persistent fiscal deficits has also led to a growing share of public expenditure going toward servicing domestic debt, compressing the available space for service delivery and public investment.
“We have had periods of high growth but these easily collapsed, so we have the high period of boom and burst. We need to have macroeconomic stability in order for people to be able to invest,” she said.
She further recommended the creation of an enabling environment for the private sector to thrive, and suggested a robust and resilient agriculture sector that would see an in productivity.