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Authors : Bernis Byamukama, Yemesrach Workie

  • GDP growth slowed to 6.0% in 2016 and headline inflation rose sharply to 7.2%, the highest level since 2012.
  • Rwanda remains peaceful and stable and preparation for the August 2017 presidential elections have commenced, with the constitution amended to address presidential term limits.
  • Macroeconomic stability and an increasingly attractive investment climate are creating a favourable environment for business start-ups, entrepreneurs and other private sector actors.

Real gross domestic product (GDP) growth is estimated to have slowed down to 6.0% in 2016 due to weak external demand and tight monetary policy from 6.9% in 2015 but it is projected to bounce back to 6.2% in 2017 as conditions improve.

Headline inflation increased to an annual average of 7.2% in 2016 from 2.5% in 2015 due to a combination of poor harvests and some limited pass-through effects from foreign exchange rate depreciation. This was the highest level in 20 years and beyond the target ceiling of 5.0% set by the National Bank of Rwanda (NBR). Improved food supply in the new agricultural season and a tight monetary policy are expected to reverse the rise in prices and bring down headline inflation to an average of 5.5% in 2017.

The current account deficit is expected to have widened to 13.2% in 2016 from 13.1% of GDP in 2015. This is largely due to the current drought, which has made food imports necessary and the purchase of two aircrafts by RwandAir. The deficit is expected to increase in the medium term, despite an increase in export diversification.

The fiscal deficit is estimated to have decreased to 3.2% of GDP in 2016 from 5.3% of GDP in 2015 before increasing to 5% in the fiscal year 2017/18. This is due to fiscal containment measures aimed at minimising the impact of external shocks from a decline in aid and export receipts.

With a stable macroeconomic environment and an increasingly attractive investment climate, Rwanda is creating a favourable environment for business start-ups, entrepreneurs and other private sector actors. It has embedded entrepreneurship development into its policy frameworks, such as its employment policy in 2007, small and medium-sized enterprises (SMEs) policy in 2010 and Private Sector Development Strategy (PSDS) in 2013. However, structural challenges continue to constrain the potential of SMEs. These challenges include access to affordable credit, business management, closing the skills gap and integrating the promotion of SMEs with broader efforts, such as urbanisation, infrastructural development and regional integration.



Authors : Robert Asogwa, Barbara Barungi, Ojijo Odhiambo

  • In 2016, Nigeria’s economy slipped into recession for the first time in more than two decades reflecting adverse economic shocks, inconsistent economic policies, and deepening security problems in the north east and Delta regions.
  • The outlook for 2017 is for a moderate economic recovery with real GDP projected to grow at 2.2% spurred by increased infrastructure spending and restoration of oil production to previous levels.
  • The government has initiated a plan for an integrated framework for development programmes in the north east through implementation of targeted social safety initiatives across the country. Private investments are a key policy priority, aimed at driving economic diversification through entrepreneurship and industrialisation in the lead sectors of agribusiness, manufacturing and mining.

The Nigerian economy continues to face serious macroeconomic challenges and is in a recession for the first time in decades. Gross domestic product (GDP) growth for 2016 is estimated at -1.5%, with a moderate recovery expected in 2017. This is attributed to a series of shocks, including the continued decline in oil prices, foreign exchange shortages, disruptions in fuel supply and sharp reduction in oil production, power shortages, and insecurity in some parts of the country, as well as low capital budget execution rate (51%). Managers of the economy responded to the recession with a package of monetary, fiscal and exchange rate policies.

The CBN pursued a contractionary monetary policy stance. It increased the monetary policy rate to 14% from 11% in 2015 to attract capital inflow and control upward ticking inflation. To protect priority sectors from the rate hike, the cash reserve requirement was reduced and the amount raised was warehoused to be accessed by priority sectors at a single digit interest rare. The action resulted in an increase in broad money supply which together with cost push factors resulting from fuel, power and foreign exchange shortages contributed to the upward trend in the headline inflation which rose to 15.7% on average in 2016 from 9.1% in the previous year. The fiscal authorities on the other hand pursued an expansionary fiscal policy with the objective of reflating the economy by allocating close to 30% of the budget to capital expenditure. The expansionary budget was planned on the back of existing fiscal consolidation underpinned by domestic resource mobilisation and expenditure rationalisation measures. In addition, the year saw a significant reduction in foreign reserves which fell to USD 25.8 billion as at yearend 2016 from USD 28 billion in the corresponding month of 2015. This was caused by a current account deficit as a result of low oil receipts, rising capital outflow caused by domestic and global financial market conditions and increased use of foreign exchange to defend the naira. A host of administrative measures were introduced to manage foreign exchange demand and an important policy shift was made to a more flexible exchange rate regime.

The 2017 outlook is for a slow economic recovery. Growth is projected at 2.2% as economic policy reforms begin to take hold and a coherent set of policies to address the macroeconomic challenges and structural imbalances is implemented. In this regard, the federal government has developed a framework in the Nigeria Economic Recovery and Growth Plan (2017-20). The plan focuses on five key areas, namely: improving macroeconomic stability; economic growth and diversification; improving competitiveness; fostering social inclusion; and governance and security. Some key reforms have been rolled out, including the conditional cash transfer initiative targeted at the poorest and most vulnerable population, improving capital budget execution, and strengthening public financial management at both state and federal levels.

Security remains a challenge despite gains made in the conflict with Boko Haram in the north east and the intensification of dialogue with militants in the Niger Delta. In addition to a military solution, the federal government is committed to implementing economic recovery and development interventions aimed at addressing the deepening fragility and vulnerability in the conflict-affected north east and the Niger Delta. The Presidential Committee on the North East Initiative (PCNI) was inaugurated towards the end of 2016 and is charged with co-ordination of all assistance and projects targeted at the most affected states in the region. The federal government has started paying out a monthly stipend of NGN 5 000 to the poorest and most vulnerable through the conditional cash transfer initiative of its social investment programme.

The acceleration of the implementation of the Nigeria Industrial Revolution Plan (NIRP) is a key priority for fostering industrialisation. The priority sectors identified are mining and quarrying, which contributed 7.1% to overall GDP in 2016, and manufacturing, which declined 2.6 % yearon-year due to increased costs in business operations, resulting mainly from foreign exchange restrictions. The manufacturing sector recorded a general decline in 2016, with an estimated 272 firms shutting down and industrial capacity utilisation dropping significantly from 51.4% in 2015 to 35.4% in 2016.



Authors : Facinet Sylla, Amata Sangho Diabate, Moctar Seydou

  • Economic growth rebounded to 5.2% in 2016 from 3.5% in 2015, thanks mainly to agricultural production and growth is projected to remain strong at 5.6% in 2017.
  • Terrorism and security threats from neighbouring countries (Mali, Libya and Nigeria), falling world oil and uranium prices, and slower growth in the Nigerian economy continue to have an impact on Niger’s economic situation.
  • Entrepreneurship in Niger is mainly informal, while industrialisation remains weak and continues to face several challenges, including problems with electricity supply.

Growth accelerated to 5.2% in 2016 and is projected to continue accelerating in 2017 (5.6%) and 2018 (6.7%). The upturn in 2016 is thanks mainly to the good winter harvest in 2016 and the increase in oil production. The recovery could have been stronger had neighbouring Nigeria’s economy not fallen into recession at the end of the third quarter of 2016. Other reasons for the good economic outlook include ongoing work on road infrastructure, the expected relaunch of the open-pit uranium mining project in Imouraren and the start of work to build an oil pipeline to export crude oil. However, this outlook is subject to risks related to climate shocks, oil-price shocks, possible delays to the pipeline and security tensions. Agriculture remains the main driver of growth, despite climate vagaries that make the economy very vulnerable.

Security and humanitarian shocks linked to the surge in Boko Haram attacks have hurt public finance management. These shocks could affect the pace of reforms and the implementation of important development programmes for Niger under the 2017-21 Economic and Social Development Plan (PDES). This situation affected the implementation of the 2016 budget, causing revenue shortfalls and overspending, especially on wages and on investments in the defence and security forces.

Entrepreneurship remains very weak in Niger due to the size of the informal economy, but measures to promote youth entrepreneurship through the National Strategic Framework for the Promotion of Entrepreneurship in Niger (CSNPEN) are reversing that trend, albeit still only slowly. Industry’s contribution to GDP averaged 15.1% for the four-year period from 2013 to 2016. Pro-industrialisation measures are hampered by many challenges, especially the longstanding lack of a development policy geared towards processing and the country’s limited electricity production. Niger will build its promotion of entrepreneurship and industrialisation around the oil and mining sectors, which have strong potential. By way of example, between the third quarter of 2015 and the third quarter of 2016, the industrial and mining production index grew by 39.5%, driven in particular by mining production (+14.6%) and manufacturing (+160.2%).



Authors : Martha Phiri, Alka Bhatia

  • Growth sharply moderated to 1.3% in 2016 but should rebound in 2017 as the agriculture sector recovers and production from new mines accelerates.
  • On-going fiscal consolidation policy measures to reduce public debt and help address the current account imbalance will need to protect growth-promoting public investments.
  • The “Growth at Home” strategy for industrialisation and the policy for promoting micro, small and medium enterprises provide a strong foundation for diversification and job creation but the pace for business environment reforms needs increasing to support entrepreneurship.

After posting annual growth rates of above 5% since 2010, Namibia’s growth momentum sharply moderated in 2016. Gross domestic product (GDP) growth slowed from 5.3% in 2015 to an estimated 1.3% in 2016 as major mining construction projects ended and fiscal consolidation took hold. In 2017 GDP growth is expected to rebound to 2.5% with the recovery of the agriculture sector and the strengthening of production and exports from new mines. The mid-term outlook is positive, albeit with significant downside risks emanating from weak Southern Africa Customs Union (SACU) revenues, fiscal consolidation, soft global commodity prices, and rising housing prices and household credit.

During 2015, a prolonged expansionary fiscal stance, in the context of falling SACU revenues combined to widen the fiscal deficit to 8.7% of GDP and pushed the current account deficit into double digits at 13.7% of GDP. These deficits were financed with the issuance of the eurobond which helped to anchor foreign reserves but increased public debt to its highest levels yet. This prompted leading rating agencies to revise Namibia’s sovereign credit rating outlook from stable to negative (Fitch rating BBB; 2 September 2016; in September 2016. As a result, the government had to change its fiscal policy stance and accelerated fiscal consolidation, proposing expenditure cuts of up to 2.8% of GDP in the mid-term review of the 2016/17 budget.

Inflation picked up from 3.4% in 2015 to 6.7% in 2016 driven by food and administrative price increases. In response to this, monetary policy was tightened to stem strong credit growth also linked to an increase in luxury imports, rising housing prices and household indebtedness. The Bank of Namibia (BoN) raised the repo rate to 7% in April, 2016 to align with the South Africa Reserve Bank (SARB)’s policy rate in the context of the Common Monetary Area. Going forward, the twin deficits are projected to narrow on the back of fiscal consolidation and export revenue growth.

Namibia’s policy for industrialisation adopted in 2012 and its implementation strategy the “Growth at Home” launched in 2015, lays a strong foundation for economic diversification and job creation. In its policy for promoting micro, small and medium enterprises adopted in 2016 the government recognises that a vibrant entrepreneurship culture and a conducive business investment climate are key imperatives for competitiveness and successful industrialisation. While some structural transformation has taken place and poverty has significantly declined, the majority of Namibians are still employed in low paid jobs dominated by primary agriculture. Furthermore, unemployment rate at 28.1% and income inequality (Gini coefficient of 0.572) remain high. To harness entrepreneurship that promotes value adding economic activities and creates quality jobs while reducing poverty and inequality, Namibia needs to accelerate implementation of its structural reform programme articulated in the Harambee Prosperity Plan and the National Development Plan in line with the aspirations of the 2030 Vision.



Authors : Andre Almeida Santos, Glenda Gallardo, Manuel Filipe

  • GDP growth declined to 4.3% in 2016 due to fiscal tightening, slowdown in foreign direct investment and the “hidden” debt crisis; it is expected to pick up to 5.5%, driven by exports from the extractives sector.
  • Though the incidence of poverty has declined, the number of poor people remains almost the same, amidst growing inequalities.
  • A weak manufacturing sector employs just 3.2% of the population, and is made up of small and micro-enterprises (90%).

Growth in real gross domestic product (GDP) is estimated at 4.3% in 2016 reflecting Mozambique’s vulnerabilities. Traditional export earnings dropped due to depressed global demand, and the El Niño drought affected agricultural production while the economy faced logistical constraints related to internal military conflict. Weak foreign-currency inflows – as gas megaprojects were stalled and external partners suspended budget support – have left the economy to its restricted internal financing capacity. Monetary tightening contracted internal demand, and imports were curtailed by further depreciation of the metical (MZN). A pick-up in coal and electricity exports, together with the expected start of an offshore natural-gas project, should help growth to increase to 5.5% in 2017 and 6.8% in 2018.

In the aftermath of the USD 1.4 billion hidden-debt disclosure in 2016, Mozambique became Africa’s most indebted country, classified by the International Monetary Fund (IMF) to be in debt distress and by rating agencies in restricted default. With potentially large revenues from liquefied natural gas (LNG) projects still in the future, in the short term the country faces a liquidity crisis to balance its external accounts and finance its fiscal deficits. A credible fiscal tightening stance is crucial to ensure debt sustainability, hinging on the restructuring of its commercial debt. The necessary political resolve will face internal resistance, particularly to addressing governance and accountability issues, and settling the political-military conflict. In the medium term, diversification of the domestic productive base is the pathway to economic resilience and inclusive development. Recent poverty data reveals slow poverty reduction but growing inequalities amongst regions, and between urban and rural populations.

Thanks to large inflows of foreign direct investment (FDI) since 2000, aluminium, coal and gas now constitute the country’s industrial backbone, with the natural gas sub-sector poised to become the main industrial cluster. These are mostly export-oriented industries, however, with limited value addition. The rest of the manufacturing sector has mainly stagnated, with the exception of food, drinks, tobacco and cement. Since independence in 1975, traditional industries such as ceramics, tea, cashew, metalworking and textiles have disappeared or become residual. In 2016, the government approved a new industrial strategy aimed at using industry as the main vehicle to prosperity.



Authors : Vincent Castel

  • Morocco’s economy grew by an estimated 1.5% in 2016 due to the adverse impact of poor rainfall but the economy is projected to grow by 3.7% in 2017.
  • Parliamentary elections in October 2016 were won by the right-wing Islamist Justice and Development Party.
  • COP22, held in Marrakech in November 2016, led to the signing of the Paris Agreement, ratified by 115 countries that produce more than 75% of global greenhouse gas emissions.

Poor rainfall limited growth to an estimated 1.5% in 2016, but growth is projected at 3.7% in 2017. Major public policies are starting to bear fruit, with agriculture gradually diversifying and industry, driven by the automotive sector, on an upward trend. Thanks to the country’s stability, its exceptionally improved business climate (with its ranking by the World Bank report Doing Business up ten spots since 2008) and the sustained development of its infrastructure (particularly ports and railways in 2016), Morocco has attracted remarkable levels of foreign direct investment compared with the rest of the subregion and the continent. The main macroeconomic aggregates have also improved, with the budget deficit projected to be 3% in 2017.

Two key public policy trends emerged in 2016. First, Morocco’s hosting of the Conference of the Parties (COP 22) on climate in Marrakech was the culmination of a year strongly focused on environmental issues. The first power station in the Noor complex in Ouarzazate opened in February 2016, and work commenced on the second and third power stations. The “Zéro-Mika” operation led to the complete prohibition of plastic bags thanks to awareness raising and the introduction of alternatives. The second key trend has been the active strengthening of Morocco’s ties with Africa. At the 27th African Union summit in July 2016, King Mohammed VI announced his desire to see Morocco re-join the Union, and the country was admitted in January 2017. Following his announcement in 2016, the king made an official tour of Tanzania, Rwanda, Ethiopia, Madagascar and Nigeria, all less traditional partners than the French-speaking West African countries. As a result, work began on a gas pipeline between Morocco and Nigeria in December, and a EUR 2 billion contract has been signed with Ethiopia to build an industrial site aimed at making Ethiopia self-sufficient in agricultural fertilisers by 2025.

In terms of entrepreneurship and industrialisation, the performances of Morocco’s new industries (automotive, aeronautical and electronics) have vastly diversified the country’s export basket after a decade of active strategies in this direction, but there are still obstacles to the development of companies. The 2015 Growth Diagnostic conducted by Morocco, the African Development Bank and the Millennium Challenge Corporation (MCC) identified education and certain aspects of the legal framework (taxation, the justice system and land ownership) as major constraints to the development of small and mediumsized enterprises (SMEs). The size of the informal economy has also been regularly blamed. The new “self-entrepreneur” status created in 2015 and the gradual extension of social benefits to the selfemployed should allow some of those operating in the informal economy to move into the formal sector.



Authors : Ndoli Kalumiya, Luka Jovita Okumu

  • The pace of economic growth was moderate in 2016, with the economy growing by 3.6% compared with 3.4% in 2015 reflecting a slight increase in domestic investment that was offset by weak external demand.
  • Political stability and sound macroeconomic management continue to promote investor confidence. Higher skills and productivity levels would make the country more competitive and innovative.
  • The government has demonstrated firm commitment to promoting, industrialisation and entrepreneurship, in an effort to boost sustainable economic growth and enhance the competitiveness of the economy.

Mauritius’ economy grew by 3.6% in 2016, following a slight pick-up in private investment but was offset by weak external demand. Economic growth was driven by the information and communications technology and financial and insurance sectors, which grew by 6.3% and 5.6%, respectively. These gains were offset by the poor performance of the construction and agricultural sectors, which contracted by 5.4% and 2.4%, respectively. Mauritius’ fiscal deficit was recorded at 3.4% of gross domestic product (GDP), by close of the fiscal year 2015/16, as the government rolled out a number of new social programmes but reduced capital spending. In July 2016, the Monetary Policy Committee (MPC) of the Bank of Mauritius (BoM) cut the key policy rate by 40 basis points to 4.0%, in the light of a benign inflation environment and subdued domestic and external demand. Headline inflation dropped throughout 2016, reaching 1.3% in December 2016. The primary factors underpinning the drop in inflation in 2016 were the decline in food prices (food items account for 27.3% of the Consumer Price Index [CPI] basket) combined with a drop in international oil prices (transport accounts for 15% of the CPI basket in Mauritius). The overall current account deficit narrowed to 3.9% of GDP in 2016 and should shrink further helped by tourism and persistently low oil prices. The country recorded gross international reserves of 4.9 billion US dollars (USD) at 30 November 2016, equivalent to 8.4 months import cover.

Mauritius benefits from political stability and sound macroeconomic management, with increased foreign direct investment (FDI) sustaining growth. Mauritius also benefits from its strategic positioning as a gateway for investments from Europe and Asia into Africa. The government’s long-term strategic vision has been set out in the country’s long-term policy document, Achieving the Second Economic Miracle and Vision 2030, and the short-to-medium term 2015-19 Government Programme which calls for a more diversified and inclusive economy. The Ocean economy is also a priority area.

The authorities are exploring innovative approaches to promote direct foreign investments and accelerate diversification and modernisation. The government aims to promote exports by developing closer links with importers and the exploitation of niche and regional markets, particularly in sub-Saharan Africa. Agreements with Ghana, Senegal and Madagascar, establishing Special Economic Zones (SEZ) in these countries to open up niche markets for Mauritius’ export industries have been approved. The vision of the current government to make Mauritius a nation of entrepreneurs is clearly set out in the 2016/17 budget speech, in which a series of measures were announced promoting the development and financing of micro, small and medium enterprises.



Authors : Selma Cheikh Malainine, Marcellin Ndong Ntah, Becaye Diarra

  • The economy grew by an estimated 3.1% up from 2% in 2015 despite a sharp fall in the price of iron ore.
  • The economic outlook is more favourable in the short and medium term, thanks to higher projected industrial and mining output, good performances in agriculture and fisheries and continuing structural reform.
  • An improved business climate is vital for the emergence of a true local entrepreneurial class that can speed up industrialisation and create decent jobs thereby reducing poverty and social inequality.

The economy grew by an estimated 3.1% in 2016 (after slowing to 2% in 2015), driven by the primary sector and a recovery in mining, with the primary sector contributing a bigger share (29.1%) of gross domestic product (GDP) (slightly up on the previous year’s 28.6%). Mining accounted for 5.6% of real GDP (up from 4.9%), mainly thanks to the opening of the Guelb II iron mine and promotion of the country’s geological and mining potential. Manufacturing’s GDP share rose by 0.2 percentage points to 6.7%, but this was still below the 10% or so it contributed before 2005. The tertiary (services) sector continued to grow and was the biggest part of real GDP (35%).

The economic outlook is fairly good in the short and medium term, thanks to higher output by the SNIM, good performances in the irrigated agriculture sub-sector (because of new farmlands) and fisheries, ongoing investment in growth-promoting infrastructure and in human capital, and continuing structural reform.

Macroeconomic gains were consolidated in 2016, with inflation still low (1.9%) mainly the result of only slightly higher food prices and control of the money supply. The budget remained in good shape, with a manageable overall deficit of about 3.3% of GDP (3.5% in 2015). Official reserves remained satisfactory at the end of 2016, at the equivalent of some 6.6 months of imports. The current account deficit continued improving, to 15.8% (down from 20% in 2015).

But the country is still vulnerable through its dependence on raw materials and from a persistently inadequate business climate. Greater efforts are needed to diversify the economy and make it more resistant to external shocks, and to improve the business climate, without which more and better private investment cannot be attracted. Further reforming the financial sector and making it more dynamic should produce new opportunities, especially for small and medium-sized enterprises (SME) by improving access to funding and expanding financial services.



Authors : Becaye Diarra, Hamaciré Dicko, Abdoulaye Konate

  • Economic growth was a robust 5.3% in 2016, and is expected to remain so in 2017 based on strong domestic demand.
  • Despite the signing of a peace and national reconciliation agreement in June 2015, the security situation was a cause for concern in 2016, with unrelenting rebel attacks against United Nations forces and the national army, plus mutually destructive fighting.
  • The modest entrepreneurial sector, concentrated around the capital Bamako, has real investment opportunities but must overcome significant obstacles that the authorities are trying to remove.

The economy of Mali suffered badly from the 2012 crisis, but its recovery strengthened in 2016. Growth estimates for 2016 (5.3%), continued financial support from the international community and measures envisaged by the government as part of its programme of economic and financial reforms offer the hope of a return to the growth rates of 2000-10 (5.7% on average).

As two-thirds of Malian exports are comprised of gold, with cotton making up a smaller proportion, they are subject to fluctuations in world prices and to climatic variability. The two commodities accounted for 70% and 10% of exports respectively in 2016. The country is also facing the challenge of high population growth (3% per year), which means that a doubling of per capita income – USD 790 in 2016 – will take 35 years based on the 2016 growth rate.

The security situation remains unstable. There were kidnappings, armed fighting within rebel groups, and between rebel groups and the Malian and UN armed forces, not only in the north of the country, but also in the centre, in particular in Bamako where there were terrorist attacks. This insecurity affects political and institutional stability as well as socio-economic prosperity. It is closely linked to weak state authority in the Sahel area, which has encouraged the proliferation and prosperity of illegal activities and organised crime. However, the authorities’ willingness to put an end to these troubles and the increased mobilisation of the international community suggest the medium term prospects are optimistic.

Due to the recovery since 2013, economic growth is expected to remain above its trend rate of around 4.5% until the end of 2018, at 5.4% in 2017 and 5.0% in 2018, before dropping back down. The inflation rate is expected to fall well below the West African Economic and Monetary Union (UEMOA) ceiling of 3.0%, with a rate of 0.9% in 2017 and 1.6% 2018. These optimistic prospects are subject to several risks, however. First, setbacks in restoring security could negatively affect consumer confidence, donors and investors, as well as increase spending on security at the expense of social programmes. Second, the economy’s high dependence on exports of gold and cotton exposes the balance of payments – and to a lesser extent public finances – to fluctuations in international commodity prices. Finally, poor management of public finances could also affect consumer confidence, businesses and international financiers, and thus slow growth. Otherwise, public management should be guided by a prudent fiscal policy that maintains sustainable deficits and by a debt policy in line with the current risk of moderate over-indebtedness.



Authors : Alka Bhatia, Peter Mwanakatwe

  • Economic growth in 2016 remained sluggish at 2.7% due largely to the El Niño induced drought, but is projected to improve to 4.0% in 2017 and further accelerate to 5% in 2018.
  • Malawi was amongst countries in the Southern African Region worst affected by the drought, with 36% of the population requiring food relief. It is crucial for Malawi to build resilience to weather-related shocks to attain food security and to achieve sustainable development.
  • Coherent national policy efforts to promote and nurture entrepreneurship are necessary to create enabling conditions for industrialisation. This will require multipronged efforts to improve the business environment, develop skills, and strengthen provision of business development services to Micro, Small and Medium Scale Entreprises (MSMEs).

In 2016, Malawi’s economy continued to face challenges emanating from adverse weather conditions. The drought reduced output of maize, the main staple crop, by 14%, necessitating maize imports to meet the supply gap, at significant cost.

The drought also had a negative impact on power supply, constraining economic activities in sectors such as manufacturing, which experienced low capacity utilisation. The economic challenges were exacerbated by poor tobacco earnings, a rapidly depreciating kwacha, high inflation and high interest rates dampening consumer and business confidence.

Average annual headline inflation in 2016 stood at 22.6%, slightly lower than the 2015 figure of 21.0%, with rising food inflation as the main driver. The monetary policy stance in 2016 remained tight with a view to containing inflation. Inflation is projected to fall to 16% by the end of 2017 and decelerate further to 9.7% in 2018 assuming normalisation of food supply, improved fiscal discipline and stabilisation of the kwacha. Nonetheless, upside risks to inflation remain elevated in view of the expected increase in international oil prices and persistent domestic borrowing pressures. The Reserve Bank of Malawi (RMB) is, therefore, likely to maintain a cautious approach and allow the policy rate to decline only when inflationary expectations are reduced.

Fiscal policy management in FY 2015/16 was challenged by revenue shortfalls, non-availability of donor budget support, spending pressures from domestic debt servicing costs and the high costs of fertiliser subsidies. Despite fiscal policy tightening, net domestic borrowing increased beyond the budget by 1% of GDP due to the need to respond to the food crisis through additional financing. Fiscal consolidation efforts were deepened in the context of FY 2016/17 budget through reforms to the Farm Input Subsidy Programme (FISP) and restrained public sector wage growth.

Real GDP growth is projected to rebound to 4.0% in 2017 and accelerate to 5% in 2018, driven by agriculture and services. The risks to the economic outlook, though, remain significant. These include inflation, weak tobacco prices and uncertainty over external donor inflows.

Entrepreneurship development needs more support in Malawi, given existing talent and potential. The growth of micro-, small- and medium-size entreprises (MSMEs) could be enhanced through better business support services, improving access to finance and creating stronger linkages to markets. A coherent and co-ordinated approach to entrepreneurial development to spur industrialisation is needed.


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Unlock the potential of African entrepreneurs for accelerating Africa’s industrial transformation, says the African Economic Outlook 2017

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