Located in Southern Africa, Malawi is landlocked, sharing its borders with Mozambique, Zambia and Tanzania. The country has an estimated population of 18.6 million (2019), which is expected to double by 2038.
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, employing nearly 80% of the population, and it is vulnerable to external shocks, particularly climatic shocks.
The Malawi Growth and Development Strategy (MGDS), a series of five-year plans, guides the country’s development. The current MGDS III, Building a Productive, Competitive and Resilient Nation, will run through 2022 and focuses on education, energy, agriculture, health and tourism. In January 2021, the Government launched the Malawi 2063 Vision that aims at transforming Malawi into a wealthy and self-reliant industrialized ‘upper middle- income country.
Political Context
Malawi is a generally peaceful country and has had 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 where 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 Democratic Progressive Party and United Democratic Front coalition, who received 39.4% of the votes. President Lazarus Chakwera and Vice President Saulos Chilima lead a coalition of nine political parties.
Economic Overview
Malawi’s economy has been heavily impacted by COVID-19 (coronavirus) pandemic. Growth is estimated at 1.0% for 2020, compared with earlier projections of 4.8%, but is projected to rebound in 2021 to 2.8%, although the nature of the recovery will depend on the evolution of the COVID-19 pandemic and government’s policy actions. The second wave of the pandemic has been more intense than the first. The COVID-19 vaccine is not expected to reach a significant portion of the population until at least mid-2022. As such, stronger social distancing policies and behavior are expected to weigh on economic activity and suppress domestic demand.
The COVID-19 crisis is increasing poverty, particularly in urban areas, where the services and industry sectors have been hit hard. A weak rebound is expected in the services and industry sectors in 2021 while international tourism is unlikely to return to previous levels in the short term. The pandemic is also disproportionally affecting human capital investment in poor households, reducing future intergenerational income mobility.
Given a widening fiscal deficit, the stock of public debt has continued to increase, largely driven by high cost domestic debt. The fiscal deficit is widening due to a slowdown in revenue collection due to the effects of the COVID-19 pandemic combined with increasing spending pressures including from response to the pandemic, debt service costs and unbudgeted arrears. Malawi is at high risk of overall debt distress and moderate risk of external debt distress, with limited space to absorb shocks.
Social Context
Malawi has made progress in building its human capital—the knowledge, skills and health that people accumulate over their lives—in recent years. Life expectancy at birth is 63.7 years (2018 Population and Housing Census). The total fertility rate in 2015/16 was 4.4 children per woman down from 6.7 in 1992. Self-reported literacy (reading and writing in any language) for population aged 15 years and above is 83.0 for males and 68.8 for females (IHS5).
However, poverty and inequality remain stubbornly high. The latest poverty figures show the national poverty rate increased slightly from 50.7% in 2010 to 51.5% in 2016, but extreme national poverty decreased from 24.5% in 2010/11 to 20.1 percent in 2016/17. Poverty is driven by low productivity in the agriculture sector, limited opportunities in non-farm activities, volatile economic growth, rapid population growth, and limited coverage of safety net programs and targeting challenges.
Development Challenges
Malawi’s development challenges are multi-pronged, including vulnerability to external shocks such as weather and health. The COVID-19 pandemic has further negatively impacted economic growth and livelihood. Other challenges include rapid population growth and environmental degradation. Energy shortages still stand out, with about 11.4% of the population having access to electricity. Infrastructure development, the manufacturing base, and adoption of new technology are low, and corruption levels remain high with Transparency International ranking Malawi at 129/180 economies in 2020.
Last Updated: Mar 18, 2021
