Reserve Bank of Malawi (RBM) Governor Charles Chuka has disclosed that the Malawi economy is expected to shrink further this year, with growth now expected at a decimal 1.6 percent — a sharp decline from the initial estimate of 4.3 percent.
The governor has since warned that the outlook is still hazy and that projection could be revised after a further review of the economic prospects by the bank’s team, a development that could see the economy getting into negative growth or recession for the first time since 2005.
Chuka was speaking on Wednesday in Lilongwe during a dinner organised by RBM to enable the governor interact with Lilongwe-based business journalists.
His revelation follows Finance Minister Ken Lipenga’s indication this week that government was revising downwards the economic growth rate projection following poor performance of the country’s agricultural and industrial sectors.
Chuka told the journalists that the development is shocking and comes at a very wrong time when there are ongoing efforts to recover the economy.
“We had figures of estimates that government did in the first quarter but since then, there has been another assessment of the situation,” said Chuka.
“This is not good news because it means that the country, apart from the many problems experienced, now has real supply shocks,” he said
He said the economic situation will affect the fiscal performance of government since there will be lower revenue levels than expected.
Just like Lipenga, he attributed the declining economic situation in the country to poor agricultural output especially in cotton and tobacco production.
It was anticipated that in the 2011/2012 growing season that tobacco production would reach 165 million kilograms while while cotton was projected to reach 200, 000 kilograms.
However, actual figures at the end of the season showed that Malawi produced only 90 million kilograms of tobacco and 90,000 kilograms of cotton.
The country has also registered contractions in the sectors of forestry, fishing and manufacturing.
However, Chuka was optimistic that in 2013, Malawi will make a turnaround in its economic performance as a number of sectors are expected to improve, with tobacco production expected to double from this year’s figure.
Lipenga has put the 2013 economic growth projection at 5.5 percent.