Located in Southern Africa, Malawi is landlocked, sharing its borders with Mozambique, Zambia, and Tanzania. The country's estimated population is 20.41 million (2022) 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.
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 which received 39.4% of the votes. President Lazarus Chakwera and Vice President Saulos Chilima lead a coalition of nine political parties known as the Tonse Alliance. The next general election is scheduled September 2025.
Malawi’s economy continues to be significantly weakened by frequent exogenous shocks coupled with macro-fiscal imbalances. Growth is projected to increase in 2023 to 1.6% as electricity supply improves, compared to 0.9% in 2022. However, severe, and persistent shortages of foreign exchange continue to subdue growth. The country is expected to secure a staff-level agreement with the IMF and return to an Extended Credit Facility by the end of 2023.
The economy is expected to grow at 2.8% in 2024, supported by further anticipated macroeconomic reforms. However, such growth remains insufficient to substantially mitigate the prevailing high levels of poverty.
Following Tropical Cyclone Freddy, agriculture output has grown only marginally since last year. Inflation has remained high at 28.4% in July 2023. Food prices are increasing rapidly, reaching 39.3% year-on-year in July 2023 mainly driven by supply constraints. To contain inflationary pressures, the policy rate was increased to 24%, from 14%. With interest rates rising, the fiscal burden of debt service has increased. While foreign exchange reserves have exhibited a modest improvement, they remained low at 0.7 months of import cover in July 2023. Recurrent climate shocks pose a considerable risk for exacerbating food supply shortages in Malawi. Coupled with persistent inflation, rising domestic prices, and an anticipated decline in per capita income, the percentage of individuals subsisting on less than $2.15 per day (2017 PPP) is projected to increase from 71% to 72% in 2023.
The implementation of fiscal consolidation reforms has resulted in a modest decrease in expected deficits, from 11.9% of GDP in 2022 to 10.4% expected in 2023. However, public debt is still in distress and unsustainable, estimated to reach 80.3% of GDP in 2023. Amidst rising interest rates and continued borrowing, interest expenditure is expected to consume 24% of the current budget.
Low agricultural productivity and limited commercialization has resulted in stagnant growth in incomes for the majority of Malawians. Structural challenges faced by the sector include market distortions such as price controls, trade restrictions, poorly targeted subsidies, and low access to inputs, which constrain investment and export-led growth. These effects are magnified by increasingly frequent and destructive tropical cyclones, including Cyclone Freddy in February 2023, which resulted in estimated losses and damages of more than $500 million.
External imbalances impede more rapid economic growth. Exports as a share of GDP have been declining over decades, driven by weak demand for tobacco and an overvalued exchange rate, which has resulted in low foreign exchange reserves and a rising spread between the official and parallel rates. The imbalance has made foreign exchange scarce, in turn constraining productive imports, including machinery and fuel for production.
Weak public financial management systems have caused the government to miss its fiscal targets, resulting in unexpected and high deficits. High and rising domestic interest rates mean that debt servicing costs continue to erode fiscal space.
Last Updated: Oct 06, 2023