Malawi economy close to recession- central bank Governor

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May 10, 2012
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BLANTYRE-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 kilogrammes while while cotton was projected to reach 200, 000
kilogrammes. However, actual figures at the end of the season showed that Malawi
produced only 90 million kilogrammes of tobacco and 90,000 kilogrammes 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.
 
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