The third Malawi Economic Monitor (MEM) by World Bank has underline that development of a better system to mitigate agricultural shocks while continuing fiscal discipline will set Malawi on an economic growth recovery path in 2017.
MEM titled Absorbing Shocks, Building Resilience released on Wednesday in Lilongwe notes that Agriculture which is the country's backbone continues to face risks associated with the drought, flooding, disease, price volatility, and low levels of on-farm adoption of risk management practices and technologies and that these have all contributed to volatile and often negative rates of agricultural GDP growth.
The report indicates that double shocks of macro economic instabiliy with adverse weather contitions which are continously affecting the agricultural production leading to food shortages, which in turn pushing up the rate of inflation are contributing to Malawi’s poor growth rate of Gross Domestic Product (GDP) like 2.8 GDP growth rate in 2015 and that with another poor perfomance in the agricultural sector this year, GDP growth is expected to be just 2.6 ercent in 2016.
However, the report observes that, were it not for a second year of weather-related shocks, Malawi would likely be starting to see signs of growth recovery. It mentions progress being made in fiscal control, efforts to consolidate public expenditure, with tighter control over spending, avoidance of expenditure overruns and reduced domesic borrowing. As well the report says pilot reforms to the farm input subsidy program show promise and if scaled up have the potential to open up fiscal space for investments in resilience and socal protection.
As Malawi is increasingly looking towards breaking the cycle of vulnerability, the report recommends that a key medium term priority is to invest more in agricultural resilience, and that in the short term, a recovery to growth is possible in 2017, based on continued efforts to maintain tight control over public expenditure and borrowing.
Among other key recommendations in the report on promoting agricultural resilience includes: connecting farmers to markets and strengthening farmer capacity to take up risk management practices; puting measures to promote freer trade in agricultural products, and to reduce price distortions and volatility which the report says this would also help to boost incentives to invest and produce.
It further encourage need to improve transparency and clear roles of the key institutions that intervene in maize markets including the Strategic Grain Reserve and the Agricultural Developent and Marketing Coorperation (ADMARK) in order to promote fairer agricultural markets.
Speaking on the report Richard Record, Senior Country Economist at World Bank said Malawi is struggling with weather-related shocks and the report is looking at how to improve the agriculture risk management and try to make Malawi economy more resilient.
“Last year we had floods and drought and this year we are having droughts again and just at the time where we are seeing progress on Government performance; we are seeing better fiscal management, we are seeing impact in tight monetary policy which is starting to bring down inflation. Of course, now Malawi is being hit by another shock from outside and so the challenge is now to how to manage that shock in short term.” He said
“And in the report we focused on looking at how to improve the agriculture risk management and try to make Malawi economy more resilient so that when the next shock comes economy can respond in a better manner, because, we don’t expect this to be the last time Malawi has drought or flood so the question is what are long term measures that can try to get Malawi out of the cycle of what we call shock recovering in shock.” he added
Agriculture is important to Malawi's overall economy and household food security as Government keep spending about US$250 million annually on the sector.
But Mr. Record observed that although some countries within the region are facing similar weather problems, most of them are better off as compared to Malawi because they are more resilient and are less dependent on agriculture due to industrialization and services.
He said Malawi which agriculture sector heavily depend on rain fed agriculture with disrupted rainfall “The long run agenda of course is diversification both within agriculture and then outside agriculture and into other sectors.”
He also said the 2016 GDP growth projection of 2.6 is based on new information of extent of Elnino impact on agricultural production.
MEM is series of bi-annual reports whose aim is to foster better informed policy analysis and debate regarding key challenges that Malawi needs to adress in order to achieve high rates of stable, inclussive and sustainable economic growth through an indepth analysis of economic trends and a macroeconomic outlook.
Earlier editions of the MEM isued in 2015 were Managing Fiscal Pressures and Adjusting in Turbulent Times.
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