Country Report Malawi April 2009

Outlook for 2009-10

• The May 2009 elections will be hotly contested by the country's three main political parties and their presidential candidates, with none expected to secure an outright majority.
• The opposition Malawi Congress Party (MCP) will have an advantage if it can secure an ally in the Northern region, dominate its Central region stronghold and benefit from the Southern region being split between its opponents.
• A new IMF programme is expected to be agreed that will continue to prioritise macroeconomic stability and structural economic reform.
• Donor support is expected to pick up over the forecast period following the passing of the 2009/10 (July-June) budget, although any debacles with future budgets will lead to disbursements being delayed again.
• The global downturn and weak prices will hit the country's trade and investment inflows, but expansion of uranium production will lift real GDP growth to 8.2% in 2009, although growth is expected to slow to 4.8% in 2010.
• Lower global oil and food prices will see average inflation fall to 8.5% in 2009, outweighing the impact of election-related spending. In 2010 lower government spending will reduce inflation to 7%.
• The current-account deficit is forecast to narrow from 13.3% of GDP in 2008 to 12.7% of GDP in 2009 and 10.5% of GDP in 2010, assisted by the onset of uranium production and the slowing of import growth.

Monthly review

• The leader of the opposition UDF, Bakili Muluzi, is barred from the presidential election on the grounds that he has already served the constitutional maximum of two consecutive terms, between 1994 and 2004.
• The governor of the central bank, Victor Mbewe, has announced that he now expects real GDP growth in 2009 to reach 8.7%, up from an earlier prediction of 8.4%. Growth will be supported by higher mining and agricultural output.
• Malawi's annual rate of inflation edged down to 9.7% in February, after hitting a two-year high of 10.1% in January. The slowdown was largely attributable to lower non-food inflation, which fell from 12.2% to 10.8% year on year.
• Malawi's tobacco auction in March has opened on a relatively positive note, owing to high production. However, set against this are concerns that prices will be depressed in 2009 in line with global economic conditions.
• A labour disputeover pay and working conditions--at the Kayelekera uranium mine has disrupted production.

Source: Country Report