Malawi Economic Monitor, December 2020 : Doing More with Less - Improving Service Delivery in Energy and Water
The pandemic has induced a sharp recession in many countries across the globe. The COVID-19 (coronavirus) pandemic has caused an unprecedented shock to the global economy and led to an expected overall contraction of 4.4 percent in 2020. Advanced e...
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| Format: | Report |
| Language: | English |
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World Bank, Lilongwe
2020
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| Online Access: | http://documents.worldbank.org/curated/en/697811607978316710/Malawi-Economic-Monitor-Doing-More-with-Less-Improving-Service-Delivery-in-Energy http://hdl.handle.net/10986/34931 |
| Summary: | The pandemic has induced a sharp
recession in many countries across the globe. The COVID-19
(coronavirus) pandemic has caused an unprecedented shock to
the global economy and led to an expected overall
contraction of 4.4 percent in 2020. Advanced economies are
projected to shrink by 5.8 percent and emerging and
developing economies by 3.3 percent. With large uncertainty
about wide and affordable access to vaccines, the outlook
for 2021 is for a modest recovery of 5.2 percent. Malawi’s
economy has been heavily affected, with growth projected at
1.0 percent in 2020, down from earlier projections of 4.8
percent. With population growth around 3.0 percent, this
represents a 2.0 percent contraction in per capita GDP.
Political stability has returned following the June 2020
Presidential elections, which should support investment.
However, global and domestic factors emanating from the
pandemic are affecting Malawi’s economy, including: 1)
disruption in global value chains and trade and logistics;
2) decrease in tourism; and 3) decrease in remittances. This
has combined with social distancing policies and behavior to
also reduce domestic demand. Lower international oil prices,
on the other hand, have helped reduce the import bill and
alleviated fuel and transportation price pressures. Services
and industry sectors have been particularly hard hit,
leading to a heavier impact in urban areas. The travel and
accommodation, tourism, and transport sectors have been
substantially affected. Wholesale and retail trade, as well
as manufacturing and construction activity declined due to
disruptions in sourcing materials and subdued demand.
However, favorable weather conditions supported a
strongagricultural harvest, particularly for maize, which is
supporting growth and food security. Yet, production of key
export crops, particularly tobacco, have declined. Poverty
reduction in Malawi has stagnated in the last 15 years and
is expected to worsen with the pandemic. An estimated 12
percent of the economically active population have
experienced job losses due to the crisis. Although this
labor market impact is moderate compared to some other
countries in the region, this comes after more than 15 years
of Malawi’s poverty rate stagnating at high levels. Poverty
has declined more slowly in Malawi than the rest of
Sub-Saharan Africa. Malawi’s poverty rate based on the 1.90
US Dollars threshold has declined by 3 percentage points
from 2004 to 2016, from 73.4 to 70.3 percent. This compares
to an 11 percentage point drop for Sub-Saharan Africa, from
53.2 to 42.3 percent. The current account deficit is
projected to expand to 19.6 percent of GDP in 2020, up from
17.8 percent in 2019. Exports and imports have been affected
by transport disruptions and lockdowns in major trading
partners, as well as lower international oil prices. Despite
the decline in imports, the drop in key exports,
particularly tobacco, is expected to be even greater.
Moreover, the downturn in the global economy has also
reduced the inflow of remittances by 30 percent for the year
through October compared to last year. |
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