Country Report Malawi August 2009

Outlook for 2009-10

• The Democratic Progressive Party secured a parliamentary majority in the May 2009 elections, which should help alleviate the political inertia that has crippled policymaking in the National Assembly since 2004.
• International donors are expected to maintain their commitment to Malawi, although this could waver if the country's economic policy were to go off? track.
• The fiscal deficit is forecast to remain high at 3.8% of GDP in 2009 before narrowing to 3% of GDP in 2010, owing to curtailed expenditure and continued revenue growth.
• The Reserve Bank of Malawi is expected to lower interest rates towards the end of 2009, as inflationary pressures ease further, and will continue on this path in 2010.
• A bumper harvest and the expansion of uranium production will underpin GDP growth of 7.7% in 2009, before growth slips to 5.3% in 2010.
• The kwacha is looking increasingly overvalued, which is unsustainable in the light of Malawi's low foreign-exchange reserves and high import demand, and is forecast to depreciate to MK155.1:US$1 in 2009 and MK179.2:US$1 in 2010.
• The current-account deficit is expected to narrow from 8.5% of GDP in 2008 to 7.2% in 2009 and 5.4% in 2010, given uranium exports and weaker import growth.

Monthly review

• The challenge against the outcome of the May 2009 presidential election launched by the opposition leader, John Tembo, has been dismissed by the High Court.
• The 2009/10 budget, published on July 3rd, sets out the government's projections for a substantial increase in revenue and modest increase in expenditure.
• The government hopes to fund the estimated fiscal deficit of 1.6% of GDP through increased foreign borrowing.
• Victor Mbewe has resigned as governor of the Reserve Bank of Malawi (the central bank) after a number of weeks of speculation over his future. The position remained vacant at the time of writing this report.
• Total tobacco sales during the first 14 weeks of trade at Malawi's tobacco auctions have fallen by 31% to US$161m. The fall in sales was caused by low prices, which were significantly below the minimum set by Mr Mutharika.

This report covers the following industry codes:
SIC Code: 60
NAICS Code: 52