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Emerging Stronger October 2016

The fourth edition of the Malawi Economic Monitor publication by the World Bank, providing an analysis of recent economic developments and a macroeconomic outlook, with a special focus on persisting poverty and vulnerability in Malawi.

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Emerging Stronger October 2016

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  1. Emerging StrongerOctober 2016

  2. What is the MEM? • A publication by the World Bank… • …aiming to foster better informed policy analysis and debate on Malawi’s development challenges. • Includes a review of recent economic developments, a macroeconomic outlook, and a special topic key to longer term development. • Published every six months.

  3. Fourth edition of the MEM • Recent economic developments • Macroeconomic outlook • Special topic – persisting poverty and vulnerability • Boxes: • What does Brexit mean for Malawi? • Why are interest rates and spreads so high? • What constraints are holding back Malawi’s private sector? • Malawi’s climate vulnerability • The impact of climate shocks on household welfare • Questions, comments, suggestions…

  4. Malawi Economic Monitor Recent economic developments

  5. Adverse weather conditions have affected Malawi’s economic growth

  6. Some improvement to fiscal trends, despite the food crisis

  7. “Brexit” will affect Malawi, primarily through exchange rate movements

  8. Managing fiscal pressures will require tight controls and reprioritization

  9. Inflationary pressures are being driven by food, but are starting to turn

  10. The Kwacha has begun to stabilize

  11. Why are interest rates and spreads so high?

  12. Exports, especially tobacco, have underperformed

  13. Weak economic performance has affected credit quality

  14. Malawi Economic Monitor Macroeconomic outlook

  15. Growth prospects for Malawi • The medium term outlook is positive: • Improved connectivity, natural resource endowments, south-south demand. • But the short term will remaining challenging, and is dependent on: • A well coordinated food security response. • The maintenance of macroeconomic and fiscal balances. • With the right conditions, a recovery is possible in 2017.

  16. Measures to build a more resilient economy

  17. Measures to build a more resilient economy (cont…) • Short term • Careful management of the humanitarian response and its transition to medium term drought response • Prudent expenditure management and commitment control to avoid loss of macroeconomic instability • Medium term • Reforms to reduce distortions and ensure that agricultural markets function more effectively • Measures to reduce deficits, over-borrowing, and crowding out of the private sector • Investments to build resilience to mitigate against climate-induced weather shocks and to diversify Malawi’s economy

  18. Malawi Economic Monitor Persisting poverty and vulnerability

  19. Malawi is especially vulnerable to climate shocks…

  20. …and poverty remains a persistent challenge

  21. Why does rural poverty persist? • Lack of robust growth in agricultural productivity • Limited opportunities to move into non-farm activities • Imperfect safety nets within a context of high economic insecurity

  22. Lack of robust growth in agricultural productivity

  23. Imperfect safety nets within a context of high economic insecurity

  24. Towards shared prosperity in rural Malawi • To lay the foundation for sustained economic growth, it is vital to re-establish macroeconomic stability • To facilitate the achievement of higher rates of inclusive growth, it is vital to improve the productivity of the agricultural sector • More balanced expenditure in the agricultural sector • Continued subsidy/FISP reform

  25. Towards shared prosperity in rural Malawi (cont…) • To achieve higher levels of agricultural productivity growth and rural poverty reduction, measures to implement significant structural change should be accelerated • Removing policy biases against urbanization • Promoting “smarter” urbanization • Promoting urban job creation

  26. Towards shared prosperity in rural Malawi (cont…) • Measures to improve the efficiency and effectiveness of safety net programs • Provide transfers of greater value to a greater total number of beneficiaries • Improve targeting for greater impact • Evaluate the value of assets produced • Measures to accelerate the demographic transition to boost poverty reduction

  27. For additional information: Download the full report here: http://documents.worldbank.org/curated/en/994621478685605311/Emerging-stronger Contact: Richard Record (rrecord@worldbank.org) Priscilla Kandoole (pkandoole@worldbank.org) Access more information here: ; http://www.worldbank.org/malawi - Questions? - Comments? - Feedback? - How can we improve the MEM? - Suggestions for future special topics?

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