7.1: Growth Sectors
Maximizing contribution to economic growth through potential growth sectors Other Information:
The economy has shown fluctuating, but generally low growth rates over the last decade. The real GDP growth has been highly
variable, mainly because of the poor performance of the agricultural sector due to over-dependence on rainfed agriculture,
unfavourable macro-economic environment and high cost of production. The low growth rates, coupled with a population growth
rate of nearly 2.0 percent per annum, have resulted in a sharp fall in per capita consumption. In general, there has been
limited progress on economic base diversification. Therefore, agriculture continues to be the main source of economic growth
for Malawi. The industrial sector remains basic and is constrained by high real interest rates, high transport and energy
costs. Overall, the economy is vulnerable to a number of factors such as drought, high transport costs, and over-dependence
on unreliable external aid. Exports remain heavily concentrated in a narrow range of primary commodities, with tobacco accounting
for over 70.0 percent of foreign exchange earnings. The majority of these commodities are sold at low and declining world
prices. This is a result of limited value addition capacity within the manufacturing sector. Economic growth is further constrained
by the land-locked nature of Malawi, low per capita income resulting in low effective demand within the country; unreliable
infrastructure, chronic food insecurity and limited opportunities for exports. These represent special barriers to private
investment and the strategies herein are designed to address these Malawi specific barriers. For Malawi to achieve an annual
economic growth rate of at least 6.0 percent, there must be a concerted effort by the private sector, Government, and all
stakeholders to accelerate growth and economic diversification. In much as the economy continues to be driven by the agricultural
sector, the other sectors of manufacturing, mining, tourism and agro-processing will play an important role in generating
economic growth. As such the creation of a favourable macroeconomic environment will be a prerequisite for investment in these
sectors. The goal is to increase productivity, diversify the economy and achieve export led growth. To attain this, potential
growth sectors will be positioned to realise the targeted economic growth and increase employment. The MEGS identified tourism,
mining, manufacturing among others as potential high growth sectors. Currently, these sectors face specific constraints that
hinder their ability to reach full potential. MGDS will, therefore, focus on addressing these specific constraints and engage
private sector in honest dialogue to implement strategies to achieve the desired medium term outcomes.
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