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Malawi Malawi at a Glance: 2007-08

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Malawi Malawi at a Glance: 2007-08 Country Report Malawi Malawi at a glance: 2007-08 OVERVIEW The president, Bingu wa Mutharika, is expected to remain in office over the forecast period, although his support in parliament will continue to be tenuous. He is locked into a fierce power struggle with his former party, the United Democratic Front (UDF), which is intent on undermining him. Economic policy will continue to be guided by the current poverty reduction and growth facility (PRGF) with the IMF, which is expected to remain largely on track. Economic growth is forecast to moderate in 2007, to 3.5%, owing to the tailing-off of the agricultural recovery that followed the 2005 drought, but to rise to 4.3% in 2008 as mining production starts. Reduced pressure on food supplies will help to bring average inflation down from 14% in 2006 to 8.6% in 2007 and 8% in 2008. The kwacha is forecast to depreciate to an average of MK141.2:US$1 in 2007 and MK147.8:US$1 in 2008, owing to strong import demand against a background of low foreign-exchange reserves. The Economist Intelligence Unit forecasts that the current-account deficit will narrow from an estimated 9.6% of GDP in 2006 to 9.1% of GDP in 2007 and 8.5% of GDP in 2008, on account of the increase in nominal GDP rather than a decline in the current-account deficit. Key changes from last month Political outlook • The legal debate over the enforcement of Section 65 of the Constitution, which forbids floor-crossing, has been resurrected, and the president is now appealing to the Supreme Court over the matter. Legal wrangling is expected to draw the issue out for as long as possible, allowing the Democratic Progressive Party to hold on to their seats (which were gained mainly from floor-crossing) in the interim. Economic policy outlook • The Malawi Growth and Development Strategy has been published, which aims to improve the macroeconomic environment further and boost spending on national infrastructure. The Reserve Bank of Malawi (the central bank) has lowered the liquid reserve requirement (LRR) from 20% to 15.5%. Economic forecast • New data from the National Statistical Office show that year-on-year inflation fell to 9.2% in February 2007, and a downwards adjustment to our international oil price forecast has led to a revision of our forecast for average Aprilinflation 2007 from 10.5% to 8.6% in 2007, and from 8.5% to 8% in 2008. The Economist Intelligence Unit 26 Red Lion Square London WC1R 4HQ United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For 60 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where the latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 26 Red Lion Square The Economist Building 60/F, Central Plaza London 111 West 57th Street 18 Harbour Road WC1R 4HQ New York Wanchai United Kingdom NY 10019, US Hong Kong Tel: (44.20) 7576 8000 Tel: (1.212) 554 0600 Tel: (852) 2585 3888 Fax: (44.20) 7576 8500 Fax: (1.212) 586 0248 Fax: (852) 2802 7638 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] Website: www.eiu.com Electronic delivery This publication can be viewed by subscribing online at www.store.eiu.com Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, online databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office Copyright © 2007 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author's and the publisher's ability. However, the Economist Intelligence Unit does not accept responsibility for any loss arising from reliance on it. ISSN 1478-0283 Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Patersons Dartford, Questor Trade Park, 151 Avery Way, Dartford, Kent DA1 1JS, UK. Malawi 1 Contents Malawi 3 Summary 4 Political structure 5 Economic structure 5 Annual indicators 6 Quarterly indicators 7 Outlook for 2007-08 7 Political outlook 8 Economic policy outlook 10 Economic forecast 13 The political scene 18 Economic policy 24 The domestic economy 24 Economic trends 25 Agriculture 27 Mining 27 Foreign trade and payments List of tables 10 International assumptions summary 12 Forecast summary 19 Macroeconomic targets 20 Malawi Growth and Development Strategy: prioritisation and costing summary 25 Tobacco auction sales 28 Tobacco exports List of figures 13 Gross domestic product 12 Consumer price inflation 23 Interest rates 24 Inflation 25 Domestic credit Country Report April 2007 www.eiu.com © The Economist Intelligence Unit Limited 2007 Malawi 3 Malawi April 2007 Summary Outlook for 2007-08 The president, Bingu wa Mutharika, is expected to remain in office over the forecast period, although his support in parliament will continue to be tenuous. The opposition parties are expected to continue their campaign to undermine the president. Economic policy will continue to be guided by the current poverty reduction and growth facility (PRGF) with the IMF, which is expected to remain on track. Economic growth will moderate as the agricultural recovery from the drought in 2005 tails off. Reduced pressure on food supplies and lower international oil prices from 2008 are expected to help to ease the average rate of inflation to 8.6% in 2007 and 8% in 2008. A small increase in exports, together with higher donor inflows and savings on interest payments on external debt, is expected to see the current-account deficit narrow to 9.1% of GDP in 2007 and 8.5% of GDP in 2008. The political scene The president has been given permission by the Supreme Court to appeal against the Constitutional Courtrs ruling that Section 65 of the Constitution, which forbids floor-crossing, can be enforced. The vice-president of the Democratic Progressive Party, Uladi Mussa, has been sacked from his position and has attempted to form a new political party. He has also been charged with embezzlement and interrogated over allegations that he plotted to assassinate Mr Mutharika. The treason trial against the vice-president, Cassim Chilumpha, has begun, but is proceeding very slowly. The former president, Bakili Muluzi, has announced his intention to stand in the 2009 presidential election. Economic policy The Malawi Growth and Development Strategy (MGDS) has been published, and focuses on improving the macroeconomic climate and developing infrastructure over the next five years. The IMF has completed its third review of Malawirs PRGF, praising the governmentrs macroeconomic management but urging greater progress with structural reforms. The Reserve Bank of Malawi (the central bank) has lowered the liquid reserve requirement from 20% to 15.5%. The domestic economy According to the National Statistical Office, year-on-year inflation fell to 9.2% in February, owing mainly to improved food supplies. According to the Tobacco Control Commission (TCC), total tobacco sales improved in 2006, as high volumes offset lower prices at the auctions. Foreign trade and payments New data from the TCC show that tobacco exports increased in 2006, and that export prices also increased marginally. Editors: Nicola Prins (editor); Pratibha Thaker (consulting editor) Editorial closing date: March 26th 2007 All queries: Tel: (44.20) 7576 8000 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule Country Report April 2007 www.eiu.com © The Economist Intelligence Unit Limited 2007 4 Malawi Political structure Official name Republic of Malawi Form of state Unitary republic Legal system Based on English common law; constitution promulgated in May 1995 National legislature National Assembly of 193 seats, elected by direct universal suffrage for a five-year term National elections May 2004 (presidential and legislative); next elections due by May 2009 (presidential and legislative) Head of state President, elected by direct universal suffrage for a term of five years; Bingu wa Mutharika was elected in May 2004 National government Cabinet, chaired by the president; a new cabinet was named in June 2004 following the May election Political parties The Malawi Congress Party (MCP) is the largest single party in the National Assembly and the second largest is the United Democratic Front (UDF); smaller parties include the Peoplers Progressive Movement, the Congress for National Unity, the Peoplers Transformation Party, the Republican Party, the Alliance for Democracy (Aford), the National Democratic Alliance (NDA) and the Movement for Genuine Democratic Change (Mgode); independent members of parliament currently form the third largest bloc in the legislature; Mr Mutharika has formed
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