Malawi is facing economic difficulties and ranks third among the poorest countries in the world. If we continue at this pace, we may soon become the poorest country of all. In fact, being in third place is just as detrimental as being in first position.
Increased unemployment, loss of income, and heightened vulnerability have been dominant social impacts of the crisis. Low pay and poor working conditions for many employees in Malawi present another challenge on the other side of the coin. Insufficient salaries and wages perpetuate poverty. Weak monetary policies provide fertile ground for the struggles of the common man.
Economic Recovery
Signs of economic recovery include a decrease in unemployment, increased consumer spending, rising incomes, an increase in the gross domestic product (GDP), and improved business activity.
Unfortunately, the Tonse Alliance Government seems to be lacking in knowledge about economic recovery. The President frequently travels to attend numerous meetings and events, from cultural festivals of Gawa Undi in Zambia to the coronation of King Charles in the UK. On average, the President travels four to five times every month, which means he is away from his office and unable to plan and work effectively.
As we speak, the economy of Malawi is in dire condition. Indicators of a struggling economy include high unemployment rates, decreased consumer spending, reduced incomes, a decline in the gross domestic product (GDP), low business activity, and, to some extent, many businesses shutting down.
I was shocked to find Steers, a shop at Walkers Filling Station, closed when I visited on Saturday, July 1, 2023. The closure is likely due to lack of business, and there are no signs of it reopening anytime soon. This is a serious situation for fellow Malawians.
Economic Growth
High economic growth leads to increased profitability for firms, enabling more investment in research and development. This can result in technological breakthroughs, such as improved medicine and greener technology. Additionally, sustained economic growth boosts confidence and encourages firms to take risks and innovate.
We can ensure economic recovery in several ways. Firstly, by identifying opportunities and challenges for each archetypal approach and investing locally.
Secondly, we need to identify and support industries that will drive economic recovery. Our economy will only grow if we focus on manufacturing and become an exporting country.
Thirdly, we should promote domestic spending through cash-transfer programs. Although the program is already in place, we need to allocate more funds as the Kwacha keeps devaluing.
Fourthly, we must protect local businesses from foreign competitors. If local businesses continue to fail, our economy will shrink.
Fifthly, we must safeguard industries that are vital to national security. It is crucial for everyone to demonstrate patriotism in this matter without any second thoughts.
Lastly, but not least, we must prioritize exports. We need to consider exporting and trading our products outside Malawi to generate more profits and foreign exchange for our nation.
Recovering From Economic Crisis
In addition to improving external debt relief initiatives, designing state-contingent debt instruments (SCDIs) can help developing countries improve liquidity and debt sustainability during times of crisis, and better share risks between borrowers and lenders. President Chakwera recently asked for debt relief during his visit to Ghana, which is commendable!
The Economy of Malawi in 2023
According to Trading Economics global macro models and analysts’ expectations, Malawi’s GDP is projected to reach US$12.97 billion by the end of 2023. In the long term, the Malawi GDP is expected to trend around US$13.41 billion in 2024 and US$13.92 billion in 2025, as per our econometric models.
In November 2022, the Executive Board of the International Monetary Fund (IMF) approved a disbursement of US$88.327 million (SDR 69.40 million) under the Food Shock Window of the Rapid Credit Facility to assist Malawi in addressing urgent balance of payment needs related to the global food crisis.
Conclusion
Currently, Malawi’s economic growth was projected to decline to 0.9% in 2022 from 2.8% in 2021, primarily due to lower agricultural output, erratic electricity supply, foreign exchange shortages affecting the importation of raw materials, and high global commodity prices. Unfortunately, Malawi seems to be sinking deeper into the sea of poverty. Furthermore, there is a looming challenge of potential food shortage this year, which could result in people starving and perishing. Therefore, citizens must tighten their belts and brace themselves for the difficulties ahead.
