LILONGWE, June 25, 2021-Malawi's low levels of electricity access, high internet prices, unpredictable connectivity, high cost of smart devices, and lack of digital skills hinder a potential of $189 million in additional GDP and $33 million in tax revenues per year, says the latest World Bank Malawi Economic Monitor (MEM).
The 13th edition of the MEM, Investing in Digital Transformation, says the government has established the essential foundation for public digital platforms with a relatively well-developed digital infrastructure. However, connectivity remains unpredictable and expensive for many people, contributing to persistent gender and rural-urban divides in accessing and using digital technology.
The MEM proposes pathways that will help the government improve the enabling environment for the digital economy to grow and thrive in Malawi. This includes rolling out digital financial services in rural areas by developing broadband and financial infrastructure. Moreover, there is a need to increase the affordability of smart devices and services, and regulatory fees should be purely tied to cost recovery.
In addition, new public-private partnerships can help drive digital transformation and demand, by developing links with regional and global incubators and accelerators. Competencies for digital skills and entrepreneurship need to be strengthened, as well as linkages between the government, academia, and private sector to co-curate ICT curricula.
"Developing Malawi's digital economy will diversify and strengthen economic growth, job creation, and innovation. Digital technologies can help lower the cost of economic and social transactions for firms, individuals, and the public sector. They can also help improve safety nets, delivery of public services, and transparency for better fiscal management and management of future crises," said Hugh Riddell, World Bank Country Manager for Malawi.
Malawi's economic growth is projected to increase to 2.8% in 2021 with good weather and the Affordable Inputs Programme (AIP) which supports a strong maize harvest. However, looking toward 2022 and beyond, continued universal fertilizer subsidies are unlikely to lead to another boost of maize production, and they will not help diversify growth. Instead, the AIP will deplete fiscal space and divert resources away from badly needed investments in economic diversification. Additionally, sustained economic recovery is at risk from high levels of debt and continued government expenditure towards consumption at the expense of critical investments.
Therefore, Malawi needs to implement policies to strengthen and diversify growth while reducing domestic borrowing. It needs to improve growth by 5% and above to increase incomes and employment, as well as to reduce a growing domestic debt burden.
The government should continue current efforts to contain the COVID-19 pandemic to reduce vulnerability to future waves. It should also reduce high fiscal deficits and domestic debt to create a foundation for macro stability and growth. Lastly, the analysis points to a need to promote diversification and growth to increase incomes and revenues, and invest in shock-responsive social protection systems that can help prepare for future crises.
The MEM provides a bi-annual analysis of economic and structural development issues in Malawi.
