Country Report Malawi March 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 current president, Bingu wa Mutharika, and his Democratic Progressive Party (DPP) will benefit from their incumbency and from the president's championing of the fertiliser subsidy scheme.
• 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 commodity 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 will 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 10.4% of GDP in 2010, assisted by the onset of uranium production and the slowing of import growth.

Monthly review

• The leader of the opposition United Democratic Front (UDF) and presidential candidate, Bakili Muluzi, has been charged with 87 counts of corruption. However, the charges are likely to have been politically motivated.
• Mr Muluzi's treatment by the authorities has angered his supporters. The risk of violence ahead of the elections has increased as a result.
• The main parties have increased their efforts to secure support in the northern region, where no one party has political dominance. The DPP has also launched a campaign to attract more women voters.
• The presidents of Malawi and Zambia have called for greater regional action to offset the negative effects of the global economic downturn.
• Investment levels increased in 2008, with the government claiming that 26,000 jobs were created as a result. However, 2009 is shaping up to be a challenging year for investment.
• Inflation reached double digits in January as food prices continued to edge up.