Malawi’s economic growth slashed, as MPC maintains policy rate at 18%
The country’s economic growth for 2022 has been revised downwards to 1.2 %, according to figures from Reserve Bank of Malawi (RBM).
This is 0.5 percentage points lower than the initial 1.7 % projection by the finance ministry.
According to the first monetary policy report, revised national accounts statistics released in December show a sharp slowdown of economic growth from 4.6 % in 2021 to 1.2 % in 2022.
The report attributes the slowdown to prolonged global supply-chain disruptions and weakening of the Malawi kwacha which were inflationary, forex shortage and intermittent power supply.
Prospects for 2023 indicate that real GDP growth is projected to pick up to 2.7 % if the agricultural sector recovers.
Malawi University of Business and Applied Sciences-MUBAS based economist Betchani Tchereni has cited industrialisation as the only key to economic growth.
Meanwhile the Monetary authorities have maintained the policy rate, the benchmark for interest rates at 18 %, to assess the impact of recent price hikes.
The Monetary Policy Committee–MPC also maintained the Liquidity Reserve Requirement ratio on domestic and foreign currency deposits at 3.75 percent.
Last year, rising inflationary pressure necessitated policy rate hike from 14% to 18 % before the pressure started easing in November signalling positive inflation prospects in 2023.
In a statement signed by the RBM Governor Wilson Banda, the MPC therefore, considered two options: to tighten further the stance or to maintain the previous monetary policy decisions.
“Whilst acknowledging that further tightening was necessary in order to speed up the return of inflation to the growth-conducive single-digit rates, the MPC reasoned that it was prudent to hold on to the previous monetary policy decisions to allow time for assessing the impact of price adjustments emanating from the normalisation of global commodity prices, in addition to other factors,” stated Banda in the statement.
It has since justified its decision to hold on to the previous decisions to allow time for assessing the impact of price adjustments emanating from the normalization of global commodity prices and other factors.
A business analyst James Chimwaza has just like Tchereni, stressed on the need for authorities to prioritize policies that encourage production.
Recently, the Malawi Confederation of Chambers of Commerce and Industry Chief Executive Officer Chancellor Kaferapanjira implored the government to incentivise the private sector so it is enabled to produce.
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