FEATURE STORY

Malawi Economic Monitor: Inaugural Economic Report Provides Economic Analysis, Recommendations

April 14, 2015

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STORY HIGHLIGHTS
  • A new economic report provides an analysis of key economic and structural development challenges that interfere with the country’s ability to achieve high rates of stable, inclusive and sustainable economic growth
  • The Malawi Economic Monitor, the first report monitoring the country’s economy, also provides recommendations to help improve macroeconomic policies
  • Developing trade competitiveness can create opportunities for the country to gain greater benefits from international trade, the report says

LILONGWE, April 14, 2015 – With Malawi facing significant economic challenges in 2015, a key priority for the government will be to take steps to restore macroeconomic stability and rebuild confidence in the economy, according to a recently-released World Bank report.

In the first economic report focused on economic and structural development issues in the country, the Malawi Economic Monitor: Managing Fiscal Pressures notes that the country’s fiscal position is under pressure following the loss of budget support and decreased confidence in the government after the theft of millions of dollars. The report observes that while economic growth continues at a moderate pace, estimated at 5.7% percent of GDP growth in 2014 and 5.1% in 2015, the rate of inflation remains high, averaging 23.8% in 2014, adversely affecting economic outcomes, business confidence, and incomes, particularly for the poor.

“Although the growth outlook remains broadly positive for 2015 and 2016, Malawi is at risk of becoming stuck in a low level equilibrium characterized by a large fiscal deficit, persistently high inflation, and high lending rates which continue to threaten growth performance,” said Richard Record, senior country economist for Malawi and lead author of the report. Record also added that rising debt and recurring public financial management challenges further compound threats to growth.                                                

Improving macroeconomic policies and stability can also have a positive impact on trade competitiveness, which has not yet reached its full potential, the report says, but can be developed to create opportunities for greater benefits from international trade.

Report recommendations to restore macroeconomic stability and build trade competitiveness include:

Steps to restore macroeconomic stability

  • Fiscal consolidation to reduce the size of the budget deficit
  • The application of a tight monetary policy and scaled back domestic borrowing to gradually reduce inflationary pressures
  • The reform of key subsidy programs, particularly FISP, in order to reduce fiscal pressures and to improve policy effectiveness
  • Implementation of public financial management reforms in prioritized areas to rebuild confidence in the integrity of Government accounts

Reforms to build trade competitiveness

  • Reviewing domestic policies that depress the performance of the export sector such as removing remaining export bans and ensuring that new ones are not introduced; reviewing existing import and export licenses; and streamlining the manner in which remaining licenses are applied
  • Reviewing and publishing trade regulations and their application and making them easily accessible in order to reduce costs, delays, and uncertainty
  • Consistent implementation of policy decisions to ensure a more predictable trading environment for existing firms and potential investors
  • Improving border crossing times and reducing delays and paperwork by implementing Government’s decision to reduce the number of agencies present at the border
  • Reducing barriers to competition in the transport sector in order to encourage entry and to reduce transport prices



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