London-based Economist Intelligence Unit (EIU) says it expects the local economy to swell by 4.6 percent in 2013.
The EIU projection is lower than the 5.7 percent projected by government and the 5.5 percent predicted by the International Monetary Fund (IMF).
Investment management and advisory firm, Nico Asset Managers Limited, says in its Annual Economic Report for 2012 that growth in 2013 will be supported by the recovery in aid, the expansion of agricultural subsidies, fiscal discipline, stabilising exchange rates and improved investor sentiment as well as an increase in uranium production.
Increased capital spending by the government, according to Nico, will sustain growth in 2014, despite uncertainties over the elections affecting overall investment levels.
It further says beyond the 2014 polls, political stability is expected to improve as election-related wrangling between political parties is reduced and the political scene becomes less divided.
“The EIU forecasts that agricultural growth, supported by public investments in rural roads and irrigation infrastructure, is forecast to reach 7 percent by 2017, despite the declining potential for raising maize output through fertiliser usage.
“While uranium output will stabilise, the mining sector will grow slowly as exploration takes place for oil (in Lake Malawi), rare earth minerals and further uranium resources,” says Nico.
It further says growth in construction, manufacturing and services is expected to recover as macroeconomic stability improves.
Nico, however, says progress in diversifying the economy, reducing poverty levels and boosting formal job growth will be slow.
“EIU’s overall growth forecast for 2014 stands at 4.8 percent, rising to an average of 6 percent in 2015- 17. Downside risks to this forecast are high, however, owing to the possibility of a severe drought, a prolonged euro zone crisis or a sharp slump in prices for Malawi’s main export, tobacco,” says Nico
The investment management and advisory firm says recovery of the economy will boost donor and investor confidence hence increasing private sector activity, adding that increased private sector activity will boost economic growth.
“Improved investor confidence will result in inflow of Foreign Direct Investment (FDI) which will improve forex availability creating an even more conducive environment for industrial production. Forex availability will also support the value of the Kwacha hence curbing depreciation of the Kwacha,” says Nico.
The Malawi Government has pegged economic growth for 2012 at 1.4 percent mainly due to contractions in the agriculture and manufacturing sectors.
President Joyce Banda and her finance team is currently implementing the Economic Recovery Plan (ERP) aimed at achieving quick development results.
Banda hopes to achieve three months import cover by December 31, 2013 single digit inflation and annual GDP growth of 5.7 percent, 100 percent of the population to be food secure and mining sector to contribute 14 percent to GDP growth.
