The Southern African nation of Malawi contains Lake Malawi, one of Africa's largest, longest lakes, and is bordered by Mozambique to the south and west, Zambia to the east, and Tanzania to the north. It has an estimated population of 18 million (2016). With the support of the International Monetary Fund (IMF), the World Bank, and other development partners, Malawi has been able to make important economic and structural reforms and sustain its economic growth rates over the last decade. Nevertheless, poverty is still widespread, and the economy remains undiversified and vulnerable to external shocks.
Malawi has had stable governments and a democratic multi-party system since the end of one-party rule in 1993. It has held five, peaceful presidential and parliamentary elections, one of which included local government elections. Its current political leader, President Arthur Peter Mutharika, was elected in 2014 and is in his first five-year term. The next elections are due in May 2019.
In 2017, Malawi’s GDP growth rate is expected to rebound to about 4.5% from 2.5% in 2016. Improved weather patterns with increased rainfall in 2017 are expected to result in higher levels of agricultural output than were recorded in 2015 and 2016. Agriculture contributes 30% of GDP. The country's headline inflation rate continues to decelerate faster than anticipated, falling to 9.3% in August 2017, compared to 22.8% in August 2016. This downward trend has largely been due to a sustained decline in food prices resulting from the increased availability of maize, and a stable exchange rate.
Sustainable growth is predicated on sound macroeconomic management and structural reforms to lay the foundations for a more resilient and diversified agriculture sector. For Malawi’s economy, the weather will remain a major part of the economic cycle, with the negative impact of bad weather compounded by factors such as population growth and environmental degradation.
Encouraging progress has been made in terms of human development in recent years. However, poverty and inequality remain stubbornly high in Malawi. Rural poverty persists with one in two people still poor, driven by poor performance of the agriculture sector, volatile economic growth, population growth, and limited opportunities in non-farm activities. Life expectancy is up to 63.9 years in 2017 from 62.8 last year.
The macroeconomic outlook faces significant downside risks. These risks relate primarily to Malawi’s continued vulnerability to external shocks, amplified by the risks of fiscal slippages. The country (and its growth performance) is expected to remain vulnerable to climate variability for some time. Similarly, despite encouraging efforts towards fiscal consolidation, experience suggests that Malawi has struggled to contain recurrent expenditure over the political-business cycle. Elections are coming up in May 2019. Households’ welfare in Malawi remains vulnerable to natural shocks such as drought and flooding, and food price inflation. Building families’ resilience to shocks through investments in basic services, asset building, the improvement of early warning systems, and the revamping of safety-net programs continue to be the major challenges going forward.
Last Updated: Oct 10, 2017