Malawi Economic Monitor, May 2016: Absorbing Shocks, Building Resilience
Droughts and floods during the past two seasons have slowed Malawi’s economic growth and made millions of people dependent on support to meet their basic food needs, exposing the country’s vulnerability to agricultural risks. But Malawi can set its economy on a better growth path. On June 29, the third edition of the World Bank’s Malawi Economic Monitor (MEM): Absorbing shocks, building resilience, was launched in Lilongwe with a special focus section on investing in agricultural resilience. The Special Focus Section draws largely from the World Bank’s Agricultural Sector Risk Assessments conducted in 2014-15 and describes how agricultural risks have affected Malawi over the past decades. Malawi is currently suffering the second consecutive year of poor harvests due to the effects of a drought that is sweeping Southern Africa. The poor harvests are having serious impacts on the economy and on food security. About 2.8 million people are currently in need of humanitarian aid in Malawi - a figure that may rise to as many as 6.5 million people before the next maize harvest.
The Main Agricultural Risks for Malawi:
Drought, pests and diseases, and price risk are the main agricultural risks facing Malawi. Over the past three decades, the country has lost about USD 150 million in crops, or almost 5 percent of Malawi’s gross agricultural output due to production risks. Most crops are affected, but maize, tobacco, and cassava see some of the highest impacts due to their importance in the agricultural sector, which in turn have serious consequences for a large segment of Malawi’s smallholders. Price risks are mainly affecting maize, tobacco and cotton. While prices risks for cotton are internationally driven, and tobacco prices are affected both by internal and external factors, maize price volatility is largely a result of domestic policy.
What can the Government of Malawi do to help farmers manage risks?
Turning the shock-recovery-shock mode of the agricultural sector into one of resilience and virtuous growth is a key challenge for the Government of Malawi as the country is expected to continue to face climate-induced shocks in the future. Although managing agricultural risks will largely fall on the private sector – not least agricultural producers – the Government has a key role to play in creating an environment conducive to successful sector operations. A priority for the Government will be providing incentives for farmers to invest in on-farm risk management measures by reducing market distortions and price volatility through freer trade and limited market interventions. This should be accompanied by efforts to build farmers’ capacity to invest in improved agricultural practices and access diverse markets. Finally, to help farmers manage risks and to ensure timely policy response as well as to avoid unintended policy impacts, the continued development of well-functioning agricultural information systems will be important.
More about the MEM:
The MEM provides an analysis of recent economic development in Malawi and an economic outlook, along with recommendations for how to increase stability and resilience through increased agricultural risk management and continued fiscal discipline. The MEM is a semi-annual publication and this edition follows the two previous editions, published in April and October 2015. To read the full report, including the Special Focus Section discussed here, click here.
>> Download the presentation given by Åsa Giertz (Senior Agriculture Economist with the Agricultural Risk Management Team in the World Bank’s Agriculture Global Practice) at the launch of the third Malawi Economic Monitor on June 29, 2016, in Lilongwe, Malawi.
Third Malawi Economic Monitor news online:
- World Bank urges Malawi to invest in agricultural resilience to spur economic growth in 2017, from the World Bank.
- World Bank, Malawi govt contradict on economic growth rate, from Nyasa Times.
- Malawi Economic Monitor: Analysis predicts continued weak growth in 2016 amid low agricultural production, from Tralac.