LILONGWE-(MaraviPost)-The International Monetary Fund (IMF) on Thursday predicted that Malawi’s economy –Gross Domestic Product (GDP) would go up by 5 percent this year owing to an expected bumper yield and improvement in electricity supply.

IMF Mission Chief for Malawi, Pritha Mitra jointly with Minister of Finance, Goodall Gondwe revealed the development to journalists in the capital Lilongwe at the end of the second review of the three-year Extended Credit Facility support programme.

This comes a few days after IMF predicted that the Malawi economy would grow by 4.1 percent.

Mitra said the economic outlook was favourable, with a likelihood of continued growth in the short to medium terms.

“In the medium-term, growth could rise further to 6-7 percent, driven by infrastructure projects including electricity generation, crop diversification, greater access to finance and an improved business climate,” Mitra said.

She said inflation was expected to ease to around 8 percent at the end of 2019 and gradually converge to 5 percent over the medium term.

 Gondwe however remained ambitious, pegging the growth prospect at 9 percent.

The estimate is higher than the 7 percent rise prospect the government made.

The country has been subjected to devastating power outages for years now, a situation that has negatively affected the private sector and economic growth prospects.

A 2018 last quarter Malawi Confederation of Chambers of Commerce and Industry Economic Review showed that economic growth prospects may still be subdued by weakened performance of the industry.

Real GDP growth was estimated at 3.7 percent in 2018, down from 5.1 percent in 2016/17, largely affected by a prolonged dry spell in the first half of 2018 and the fall armyworm infestation, which reduced maize output.

A Summary of Statement at the End of an IMF Staff Visit to Malawi

1. Malawi’s performance under the Extended Credit Facility program has been good.

2. Malawi’s economic outlook is favorable. Economic growth is projected to reach about 5 percent in 2019 supported by a rebound in agriculture and some improvement in electricity generation.

3. Malawi’s medium-term growth could rise further to 6-7 percent, driven by infrastructure projects—including electricity generation—crop diversification, greater access to finance, and an improved business climate.

4. Malawi’s inflation is expected to ease to around 8 percent at end-2019 and gradually converge to 5 percent over the medium term.

5. Malawi has met all but one of the quantitative performance criteria (QPC) for end-December.  The other one was not met due to budgetary constraints and funding elections.

6. Malawi completed two structural benchmarks on time and most of the rest were met with a short delay.

7. Malawi authorities have an ambitious plan for infrastructure projects that aims to support sustainable growth and poverty reduction.

8. Malawi’s banking system’s resilience is improving as reflected in reduced non-performing loans and increased provisioning.

9. The newly adopted RBM Act has enhanced the RBM’s autonomy.

10. Key reform areas are to improve debt
management and public financial management.

11. Malawi should address challenges in property rights to sustainably
increase access to finance.

12. Malawi needs to put more efforts to ensure fiscal sustainability

(IMF PRESS RELEASE, 14 March 2019, after meeting Malawi Government officials from March 5, 2019 on the second review of three-year ECF)