Located in Southern Africa, Malawi is landlocked, sharing its borders with Mozambique, Zambia, and Tanzania. The country's estimated population is 21.1million (2023) with an annual growth rate of 2.6%.
Malawi remains one of the poorest countries in the world despite making significant economic and structural reforms to sustain economic growth. The economy is heavily dependent on agriculture, which employs over 80% of the population, and it is vulnerable to external shocks, particularly climatic shocks.
In January 2021, the government launched the Malawi 2063 Vision that aims to transform Malawi into a wealthy, self-reliant, industrialized upper-middle-income country, through a focus on agriculture commercialization, industrialization, and urbanization. The first 10-year implementation plan anchors the World Bank’s Country Partnership Framework (CPF) (FY21- FY25).
Political Context
Malawi has enjoyed sustained peace and stable governments since independence in 1964. One-party rule ended in 1993. Since then, multi-party presidential and parliamentary elections have been held every five years.
Malawi’s sixth tripartite elections were conducted in May 2019. The presidential results were nullified in February 2020 by the Constitutional Court. Fresh presidential elections were held on June 23, 2020, in which Lazarus Chakwera of the Malawi Congress Party and Saulos Chilima of the UTM Party were elected as president and vice president respectively after getting 58.6% of the votes. They won against Peter Mutharika of the Democratic Progressive Party and United Democratic Front coalition that received 39.4% of the votes. President Lazarus Chakwera and Vice President Saulos Chilima lead a coalition of several political parties known as the Tonse Alliance. In late June 2024, President Chakwera appointed a new Vice President, Michael Usi, UTM, following the death of Vice President Saulos Chilima in a plane crash on June 10, 2024. The next general election is scheduled for September 16, 2025.
Economic Overview,
Malawi’s real GDP is projected to grow modestly by 2% in 2025, which would not be sufficient to prevent a fourth consecutive contraction in per capita income. The GDP growth will be driven by a modest recovery in the agricultural sector, which experienced negative growth in 2024 due to El Niño-induced drought conditions.
Additionally, modest growth is anticipated in the industrial and services sectors and will remain subdued due to the continued unavailability of foreign exchange, which is constraining the importation of production inputs. The real appreciation of the official exchange rate will continue to incentivize imports and discourage export growth, deepening external imbalances.
Real GDP growth is however projected at 2.4% in 2026, and this stagnation impedes efforts to reduce poverty in Malawi.
The budget deficit is expected to widen to 8.7% of GDP in 2025, driven by election year spending and the need to absorb some critical expenditures previously financed by the United States government.
Inflation is expected to remain above 30% due to a weaker agricultural recovery, the imposition of new import bans constraining supply, as well as continued high money supply growth.
The outlook is subject to significant downside risks, including potential fiscal slippages that could entrench macroeconomic instability. While direct and indirect effects of recent trade policy shifts have caused a downward shift in growth projections, continued uncertainty and weaker than expected global demand may further adversely affect Malawi’s growth prospects. Failure to address external imbalances may further perpetuate input shortages. Upside risks include the potential unfreezing of U.S. aid to Malawi, easing of trade restrictions, faster-than-expected development of mining mega-projects, and the rapid conclusion of debt-restructuring negotiations with commercial external creditors.
Development Challenges
In the past three years, per capita income has declined as Malawi's economic growth lagged population growth. The period has seen widening fiscal and current account deficits, an unsustainable debt burden, increasing capital and price controls, and severe foreign exchange shortages, hindering economic stabilization efforts.
Frequent climatic disasters and other exogenous shocks have exacerbated these challenges, making it difficult for poor households to build resilience.
In 2024, Malawi’s economy faced significant challenges, with real GDP growth slowing to 1.8% due to a severe drought and acute foreign exchange shortages. The poverty rate rose to 71.2%. The interplay of external sector imbalances, inflationary pressures, and fiscal constraints has deepened economic vulnerabilities, impeding recovery prospects.
Despite significant progress in reducing child mortality and fertility rates, hunger remains a critical concern due to successive weak harvests since 2022. This has hindered human capital development, with the rate of stunted children under five stagnant at 38% since 2015. Foreign exchange constraints have also limited imports to compensate for the food supply deficit.
The number of people living in poverty is expected to increase in 2025 amidst this challenging economic environment and rising food insecurity, with an additional 417,000 people falling below the $2.15 per day threshold, bringing the total number of people living in poverty to 15.8 million.
Last Updated: Apr 16, 2025
