Among the shocks to a developing economy, natural disasters are some of the most destructive. This is the case with the Southern African country of Malawi where a five year drought as drastically affected the harvest of maize, the nation's most important staple crop.
The humanitarian crisis--with 4.6 people on the brink of starvation--is the most immediate. But Malawi's economy is also at risk.
Because of a need to import maize, Malawi's trade deficit, already high, has increased. Prospects for GDP growth for the year have been reduced to 2.7 percent.
The International Monetary Fund (IMF) has come forward with promises of aid, but the inflow of funds is not likely to impact the country's economy in 2005. For 2006, however, the IMF has forecast growth of the country's GDP at 8.2 percent, according to an August 18, 2005 story in Business in Africa (Rivonia, SA).
Previously, the Malawi government forecast growth for 2005 at 4.8 percent. But Business in Africa said that a report by the Standard Bank Group revised the number sharply downward.
Malawi is not the only country in Southern Africa to be affected by the long drought. Other countries' agricultural sectors have also been adversely affected with small farmers enduring the brunt of the damage. Because of its large international debt, however, Malawi is particularly vulnerable to such a fundamental shock.
One of Malawi's other agricultural products, tobacco, is also in trouble. The country relies on tobacco for much needed foreign exchange, but export volume for this commodity appears to be at the...