Long Walk To Middle Income Economy
Source: The Times Group Malawi
UNSTABLE -- Malawi's economic trajectory lags that of top growth performers
By William Kumwembe & Serah Chilora:
Malawi's aspiration of becoming a lower middle-income economy, at least by 2030, seems dim as gross domestic product (GDP) growth continues to be swayed by myriad shocks the country faces. According to the first Malawi 2063 Implementation Plan (MIP-1), Malawi set an ambitious target of graduating to a middle-income economy status within a decade from 2020.
Lower middle-income economies are those with a gross national income (GNI) per capita of between $1,086 and $4,255.
But the country's per-capita income, which is derived by dividing national income by population, is ranked one of the lowest in the world at around $600.
And to attain the mark, the country needed to be growing its economy in real GDP terms by, at least six percent per annum, in the space of ten years.
In the first four years of the MIP- 1 implementation period, Malawi economic growth has stagnated due to macroeconomic uncertainty and the lingering effects of the external shocks.
Since the launch, the economy has been growing by an average of 1.76 percent per year.
In 2023, the economy grew by 1.5 percent from 0.9 percent registered in 2022.
Commenting on the prospects in a response to an emailed questionnaire, World Bank Senior Country Economist for Malawi Jakob Engel said while it is theoretically possible for Malawi to achieve the middle-income economy status within the projected period, it would require rates of growth above 10 percent over the next six years.
"What will be important between now and 2030 is creating the foundations to achieve the 2063 target of attaining upper-middle income status, which is still within reach but will also require a significant change in the management and structure of the economy," he said.
The World Bank recently revised its economic growth projection for Malawi to 2.0 percent due to the impacts of the dry spell in January and February, as well as other recent extreme weather events. We expect a contraction in agricultural GDP this year.
According to Engel, continued unavailability of foreign exchange has also constrained all sectors in the economy that require imports and deters investors.
He however, said the Bretton Woods' baseline assumption is that the economy will gradually recover in the coming years, with GDP growth at around four percent next year.
"Higher growth rates are also possible but this requires two things: first, there is an urgent need to improve the resilience of the economy to make the impact of the frequent shocks Malawi experiences less severe.
"Second, in a context of very limited fiscal space (and therefore highly constrained scope for government investment), the focus needs to be on increasing private investment, which means making it much easier for Malawians and foreigners to invest in and export from Malawi," Engel said.
The National Planning Commission (NPC) -- a public body mandated to draw and oversee implementation of long-term national development plans believes that with the slow start towards MIP-1 milestones, the economy needs to grow by an average of 10.6 percent per annum from 2024- 2030 for the country to achieve the MIP-1 milestone.
NPC Public Relations and Communication s Manager Thom Khanje, however, remained optimistic that the target is attainable in the country enhances efforts towards growing the economy.
"Although this looks to be a daunting task, it is attainable with strategic and committed investments in productive sectors of the economy. Malawi has achieved a GDP growth rate of higher than 10 percent before," Khanje said.
Malawi has struggled to sustain economic growth despite large inflows of official d e v e l o p m e n t assistance averaging $1.1 billion or 12 percent of GDP per year in the past two decades.
Available data shows that between 2005 and 2020, the country has registered an average growth rate of 4.9 percent compared with an average of 5.9 percent in low-income countries in sub-Saharan Africa.