Country Report Malawi November 2009

Outlook for 2010-11

• The strong mandate of the president, Bingu wa Mutharika, and the parliamentary majority of the Democratic Progressive Party (DPP) will help facilitate wider economic and political reforms.
• Political manoeuvring with the presidential succession that is due in 2014 in mind will increase during the forecast period, leading to increased tension in the DPP.
• International donors are expected to maintain their commitment to Malawi, but this could waver if the country's economic policy were to go off track.
• The Economist Intelligence Unit believes that the fiscal deficit will narrow slightly from 3% of GDP in 2010 to 2.7% of GDP in 2011, owing to curtailed expenditure and continued revenue growth.
• Slower growth in agriculture and a lack of new mining projects will see growth slow from 7.6% in 2009 to 5.3% in 2010 and 5.1% in 2011.
• The overvalued kwacha is expected to depreciate from an annual average of MK159.5:US$1 in 2009 to MK195.8:US$1 in 2010 and MK203.5:US$1 in 2011.
• We expect that the current-account deficit will narrow from 7.4% in 2009 to 5.9% in 2010 and 5.6% of GDP in 2011, given uranium exports and weaker import growth.

Monthly review

• Mr Mutharika fuelled speculation that he is grooming his brother to succeed him by publicly speaking about his eligibility for the presidency in October.
• Mr Mutharika intends to strengthen efforts at fighting corruption, with increased focus likely to be placed on DPP members and officials.
• A meeting of the Southern African Development Community (SADC) in September nominated Mr Mutharika and the president of Lesotho for the next rotation of the chair of the African Union (AU) in 2010.
• The governor of the Reserve Bank of Malawi (RBM, the central bank), Perks Ligoya, highlighted the need to tighten fiscal and monetary policy in order to cut inflation and allow the country to build up its foreign-exchange reserves.
• Malawi's tobacco auctions closed for the season in October, and early estimates suggest that tobacco revenue fell to US$405m in 2009.
• Uranium exports began in mid-October and were transported through Zambia and into Namibia, before being exported to Canada. Exports from the Kayelekera mine are expected to reach full capacity by December.

This report covers the following industry codes:
SIC Code: 49;60;53
NAICS Code: 22;52;44