THE IMPACT OF FISCAL DEFICIT AND GOVERNMENT EXPENDITURE ON ECONOMIC GROWTH IN MALAWI

Abstract

The study examined how fiscal deficit and the composition of government expenditure affected economic growth in Malawi from 1974 to 2021. Data collected from the Ministry of Finance and Economic Development, and World Development Indicators of the World Bank was analysed using Vector Error Correction Model (VECM). Results showed a negative relationship between fiscal deficit and economic growth in the long run and an insignificant relationship in the short run. Development expenditure showed a positive impact on growth both in the long and short run whereas recurrent expenditure had a negative impact on growth in the long run and no impact in the short run.