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Facing our realities - Malawi budget speech 2002/03

3. The Malawi economy
 
Economic Performance in 2001/2002

  1. Mr. Speaker, Sir, Malawi's economic performance in 2001 was dismal. The preliminary out-turn shows that the economy grew by –1.5 percent compared to a projection of 2.3 percent for the year. This is largely attributed to a substantial reduction in agricultural output. In 2002, the economy is expected to grow by 1.4 percent. Although the forecast for growth in 2002 is 1.4 percent, the main thrust of the Budget I am presenting today and subsequent ones is to accelerate real gross domestic product (GDP) growth rate to at least 6 percent in order to make a dent on poverty.


  2. Mr. Speaker, Sir, the annual average inflation for 2001 was 27.5 percent compared to the 20 percent estimate. Most of this inflation came from increases in prices of petroleum products and maize. Despite failing to achieve the inflation target for 2001, inflation has continued to decline. For instance, inflation declined from 33.7 percent in January 2001 to 17.1 percent in May 2002.


  3. Mr. Speaker, Sir, recent developments in the foreign exchange market have been as a result of both international and domestic factors. In view of these developments, the Kwacha appreciated from about K80.00 to the dollar in January 2001 to about K62.00 to the US dollar in September 2001, and has since depreciated to about K76.00 to the United States dollar in May 2002.


  4. Although inflation has declined, interest rates remain very high. The base-lending rate for the commercial banks, for example, has remained at around 46 percent since July 2001, resulting in lending rates of around 54 percent. These high interest rates continue to stifle private sector investment. Government will, therefore, continue to implement tight fiscal and monetary policies aimed at reducing inflation and lowering interest rates so as to create a conducive macroeconomic environment for private sector participation.

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